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- 28 March 2025
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Governing Council decisions - Other decisions
- 28 March 2025
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The ECB BlogDetails
- Subtitle:
- We constantly hear of exciting new ways AI tools can help to tackle economic problems and the productivity gains they bring. However, benefits can only materialize when firms actually use AI.
- 28 March 2025
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Press release
- 27 March 2025
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SpeechDetails
- Subtitle:
- Speech by Isabel Schnabel, Member of the Executive Board of the ECB, at the 2025 Mais Lecture at Bayes Business School
Annexes- 27 March 2025
- 27 March 2025
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Monetary developments in the euro areaAnnexes
- 26 March 2025
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Working Paper Series - Issue No. 3044Details
- Abstract:
- This paper analyzes the private production of safe assets and its implications forfinancial stability. Financial intermediaries (FIs) originate loans, exert hidden effort toimprove loan quality, and create safe assets by issuing debt backed by the safe paymentsfrom (i) their own loans and (ii) a diversified pool of loans from all intermediaries. Ishow that the interaction between effort and diversification decisions determines theaggregate level of safe assets produced by FIs. In the context of incomplete markets, Iidentify a free-rider problem: individual FIs fail to internalize how their effort influencesthe ability to generate safe assets through diversification, since the latter depends onthe collective effort of all FIs. This market failure generates a novel inefficiency, thatworsens as the scarcity of safe assets increases. The public provision of safe assetshelps mitigate this inefficiency by reducing their scarcity, but it cannot fully resolve it.Moreover, the impact on the total private supply of safe assets is ambiguous: public safeassets reduce incentives for diversification (crowding-out effect), which in turn increasesFIs’ incentives to exert effort (the crowding-in effect).
- JEL Code:
- G20,G28
- 26 March 2025
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Working Paper Series - Issue No. 3043Details
- Abstract:
- We investigate the interaction between monetary and macroprudential policy in affecting banks’ lending and risk-taking behaviour using rich euro area credit registry data and exploiting a unique setting that combined a sharp and unexpected monetary tightening with a wave of macroprudential tightening initiated before. While, for the average bank, required capital buffer increases did not significantly reduce lending additionally during the monetary tightening, for those banks that became capital-constrained lending fell by about 1.3-1.8 percentage points more for existing credit relationships and new bank-firm relationships were 2.5-4.4 percentage points less likely to be established, both relative to better-capitalized banks. In addition, such banks were more reluctant to pass higher policy interest rates on to their borrowers and took fewer risks, with a greater reduction in the LTV ratio for newly originated loans, and less reliance on risky assets, such as commercial real estate, as collateral. Our analysis shows that when calibrating monetary and macroprudential policies, it is crucial to account for the effects of policy interactions and the role of bank heterogeneity.
- JEL Code:
- E5,E51,G18,G21
- 26 March 2025
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Research Bulletin - Issue No. 129Details
- Abstract:
- This article investigates how firms transmit monetary policy shocks to individual labour market outcomes at both the intensive and extensive margins. Using matched employer-employee administrative data from Germany, we study the effects of monetary policy shocks on individual employment and of labour income conditioning on characteristics of workers and firms. First, we find that the employment of workers at young firms is especially sensitive to monetary policy shocks. Second, wages of workers at large firms react more than those at small firms, with some pronounced asymmetries – differences between large and small firms are more evident during monetary policy easing. The differential wage response is driven by workers earning above-median wages and cannot be fully explained by a worker component. Notably, larger firms adjust wages more significantly despite experiencing similar changes in investment and turnover compared to smaller firms.
- JEL Code:
- E52,F41,Q43
- 25 March 2025
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Weekly financial statementAnnexes
- 25 March 2025
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Weekly financial statement - Commentary
- 25 March 2025
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Working Paper Series - Issue No. 3042Details
- Abstract:
- Do sovereign credit ratings take into account physical and transition climate risks? This paper empirically addresses this question using a panel dataset that includes a large sample of countries over two decades. The analysis reveals that higher temperature anomalies and more frequent natural disasters—key indicators of physical risk—are associated with lower credit ratings. In contrast, transition risk factors do not appear to be systematically integrated into credit ratings throughout the entire sample period. However, following the Paris Agreement, countries with greater exposure to natural disasters received comparatively lower ratings, suggesting that credit rating agencies are increasingly recognizing the significance of physical risk for sovereign balance sheets. Additionally, more ambitious CO2 emission reduction targets and actual reductions in CO2 emission intensities are associated with higher ratings post-Paris Agreement, indicating that credit rating agencies are beginning to pay more attention to transition risk. At the same time, countries with high levels of debt and those heavily reliant on fossil fuel revenues tend to receive lower ratings after the Paris Agreement. Conversely, sovereigns that stand to gain from the green transition—through revenues from transition-critical materials—are assigned higher sovereign ratings after 2015.
- JEL Code:
- G15,G24,F3,F64,H64
- 25 March 2025
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The ECB BlogDetails
- JEL Code:
- O10,Q20
- Subtitle:
- AI adoption requires enormous amounts of electricity. And so does greening the economy. Are the digital and green transitions clashing or can they be successfully achieved together? The ECB Blog takes a closer look.
- 24 March 2025
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Working Paper Series - Issue No. 3041Details
- Abstract:
- We examine whether loan portfolio sectoral specialization provides informational advantages to banks, enabling better credit risk assessment. Using euro area credit register data, we compare probabilities of default assigned by specialized and non-specialized banks to the same borrowing firm several quarters before the borrower defaults. We find that banks specialized in the borrower’s sector are better in predicting future defaults. This is mostly driven by specialized banks actively raising probabilities of default earlier, not by higher probabilities of default when loans are issued. As a result, specialized banks also increase provisions to these borrowers. We do not observe differences in credit risk assessment towards healthy borrowers, suggesting that the effect is not attributable to general conservatism but to more accurate evaluation of credit risk in the sectors of banks’ specialization. Our results are more pronounced for smaller firms and when banks do not have long-term relationships with their defaulting borrowers.
- JEL Code:
- G21,G32,D82
- 24 March 2025
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Statistics Paper Series - Issue No. 50Details
- Abstract:
- This paper presents the estimation method used to break down the euro area portfolio investment liabilities in the international investment position (i.i.p.) and their corresponding income debits in the balance of payments (b.o.p.), by main geographical counterpart. Identifying non-resident investors in euro area portfolio investment liabilities (i.e. equity and debt securities issued by euro area residents) is a complex task, as securities are regularly traded in secondary markets and held via custodians and other financial intermediaries. Consequently, identifying the actual holders of euro area securities may be hampered by so-called “first-known counterparty” and/or “custodial” biases if statisticians cannot look through the chain of intermediaries. Owing to these difficulties, the geographical counterpart allocation of euro area portfolio investment liabilities cannot generally be directly collected from reporting agents (i.e. the issuers of euro area securities) but instead needs to be estimated. The estimation method presented in this document relies on a comprehensive set of so-called “mirror” datasets (i.e. information on the holders of euro area securities) supported by temporal disaggregation and econometric techniques. The results provide robust estimates of portfolio investment liabilities and income debits by geographical counterpart.
- JEL Code:
- C22,C82
- Network:
- N/A
- 24 March 2025
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InterviewDetails
- Subtitle:
- Interview with Piero Cipollone, Member of the Executive Board of the ECB, conducted by Andrés Stumpf
- 21 March 2025
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The ECB BlogDetails
- JEL Code:
- O14,J60
- Subtitle:
- AI is already part of many workers’ daily routines. Some fear losing their jobs, but most don’t. The ECB Blog looks at how workers are using AI tools, how they feel about it and what that means for work in the future.
- 21 March 2025
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Balance of payments (monthly)Annexes
- 21 March 2025
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Balance of payments (monthly)
- 20 March 2025
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SpeechDetails
- Subtitle:
- Keynote speech by Philip R. Lane, Member of the Executive Board of the ECB, University College Cork Economics Society Conference 2025
- 20 March 2025
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Economic Bulletin
- 20 March 2025
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Economic Bulletin - BoxEconomic Bulletin Issue 2, 2025Details
- Abstract:
- This box describes the Eurosystem liquidity conditions and monetary policy operations in the seventh and eighth reserve maintenance periods of 2024, from 23 October 2024 to 4 February 2025.
- JEL Code:
- E40,E52,E58
- 20 March 2025
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Economic Bulletin - BoxEconomic Bulletin Issue 2, 2025Details
- Abstract:
- This box examines euro area credit conditions from the perspective of banks and firms. The analysis uses data from the bank lending survey and the survey on the access to finance of enterprises. By offering qualitative insights into credit supply and demand, these surveys complement hard data in analysing how monetary policy is transmitted to firms through banks. The respective survey findings confirm that the general economic outlook and firm-specific conditions are significant factors affecting credit standards and the availability of bank loans. Although the surveys evaluate bank loan demand from different angles, both surveys indicate subdued demand developments in 2024. Furthermore, the latest data for both surveys, covering the fourth quarter of 2024, signal persistently weak loan demand, despite declining interest rates, and a renewed tightening of bank credit supply to firms in the euro area.
- JEL Code:
- E4,E44,E5,E51,E52,G21,G30
- 20 March 2025
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Economic Bulletin - BoxEconomic Bulletin Issue 2, 2025Details
- Abstract:
- Historically, stronger dynamics in services prices than in non-energy industrial goods (NEIG) prices have led to a persistent positive gap between services and NEIG inflation rates. However, the relative price of goods versus services rose rapidly in 2021-2022 before subsequently falling back. This box reviews this episode and examines whether the pre-pandemic trend in this relative price development provides a good benchmark for future developments, also taking into account the potential impact of structural factors related to deglobalisation, digitalisation, demographic trends and climate change.
- JEL Code:
- E31,E52
- 20 March 2025
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Economic Bulletin - BoxEconomic Bulletin Issue 2, 2025Details
- Abstract:
- This box explores the use of corporate earnings calls as a novel, high-frequency source of data for nowcasting and forecasting labour demand in the euro area. Labour demand has started to show signs of cooling following its post-pandemic peak. By applying textual analysis to transcripts of earnings calls, we construct an indicator that correlates strongly with the euro area job vacancy rate. This metric enables us to produce timely forecasts ahead of official data releases. Utilising a mixed data sampling (MIDAS) regression approach, we use this indicator to forecast the job vacancy rate. We also produce forecasts based on Indeed online job posting data. Our findings indicate a sustained moderation in labour demand, suggesting that the job vacancy rate will hover at around 2.5% through mid-2025. This method makes assessments of labour demand both more timely and more accurate.
- JEL Code:
- C22,C53,E37
- 20 March 2025
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Economic Bulletin - BoxEconomic Bulletin Issue 2, 2025Details
- Abstract:
- The use of artificial intelligence (AI) models has grown rapidly in recent years. This box explores how these models could affect energy demand in the future. Over the period from 2022 to 2026, the AI-related rise in global electricity consumption is projected to equal around 4% of the EU’s total electricity consumption and is likely to be met by either natural gas power plants or renewables. While this increase is significant in absolute terms, it is expected to have a limited impact on gas prices given the vast size of global natural gas markets. By contrast, the fragmented nature of national electricity markets means these markets are more vulnerable to AI-driven price pressures.
- JEL Code:
- Q43,Q47,E31
- 20 March 2025
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SpeechDetails
- Subtitle:
- Speech by Christine Lagarde, President of the ECB, at the Hearing of the Committee on Economic and Monetary Affairs of the European Parliament
Annexes- 20 March 2025
- 20 March 2025
- 19 March 2025
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SpeechDetails
- Subtitle:
- Keynote speech by Frank Elderson, Member of the Executive Board of the ECB and Vice-Chair of the Supervisory Board of the ECB, at the Morgan Stanley European Financials Conference
- 18 March 2025
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Weekly financial statementAnnexes
- 18 March 2025
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Weekly financial statement - Commentary
- 18 March 2025
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Economic Bulletin - BoxEconomic Bulletin Issue 2, 2025Details
- Abstract:
- This box compares euro area export performance in high-tech sectors with that of China and the United States. While the euro area has maintained market share in several fast-growing high-tech sectors, it has underperformed in large medium-high-tech sectors. The latter, by virtue of their size, drive overall export growth and account for most of the euro area’s losses and China’s gains in export market shares. Both the United States and China have introduced new policies to boost their exports in specific sectors, and the strong export performance of the United States may be attributed to incentives introduced by the Inflation Reduction Act and the CHIPS and Science Act.
- JEL Code:
- F13,F14,F62,O33
- 18 March 2025
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Economic Bulletin - BoxEconomic Bulletin Issue 2, 2025Details
- Abstract:
- Business investment has grown less dynamically in the euro area than in the United States since the early 2000s, but in the aftermath of the pandemic the differential has been particularly marked. This box breaks business investment down by asset type and assesses some of the factors behind this disparity. Analysis suggests that demand, competitiveness, confidence and policy efficiency all contribute to higher tangible investment in the United States. Weaker investment growth in intangibles in the euro area seems to be related to less innovation at the firm level. In addition, firms see uncertainty, energy costs, and regulation in product and labour markets as more severe obstacles to investment in the EU than in the United States. Recent EU policy initiatives and the advancement of the capital market union can provide new impetus to closing the investment gap with the United States.
- JEL Code:
- E22,E6,N10
- 18 March 2025
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Working Paper Series - Issue No. 3040Details
- Abstract:
- Targeted longer-term refinancing operations (TLTROs)helped supporting bank lending to firms and to households in the course of the COVID-19 pandemic. The use of TLTRO funding for mortgage loans to households had explicitly not been included into the targeted loan categories of these schemes, thereby, limiting potential unintended side effects on residential real estate markets. This paper, by means of an empirical analysis, assesses the impact of the relaxation of TLTRO III conditions at the beginning of the COVID-19 pandemic on euro area banks' loan portfolio composition. Our findings suggest that the targeted funding instrument under the relaxed pandemic conditions might, to some extent, have contributed to further fuelling residential real estate vulnerabilities, especially for banks in already vulnerable countries. Our results also contribute to the discussion on policy design and the preservation of the targeted nature of such support measures going forward and their interaction with financial stability.
- JEL Code:
- E52,E58,G01,G21,G28
- 18 March 2025
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Working Paper Series - Issue No. 3039Details
- Abstract:
- We analyze the impact of negative reference rates on the interest rate behavior of more than 500 Austrian banks from 2009Q1 to 2021Q4. Using panel vector error correction analysis with the Engle-Granger procedure in two steps, we establish a cointegration vector that links bank-specific lending rates, deposit rates, the 3-month Euribor, and the ECB Deposit Facility Rate. We propose two hypotheses to evaluate the effects of negative 3-month Euribor on this vector. Firstly, we explore how an Austrian Supreme Court decision enforcing a zerolower bound on household deposits could decrease the lending-deposit rate spread. Secondly, we examine the emergence of two “true prices” for loans and deposits due to the negative 3-month Euribor. This is linked to an Austrian Supreme Court decision mandating the transmission of negative reference rates to bank-specific lending rates, potentially affecting cointegration with the 3-month Euribor. Our findings show a significant spread reduction after the introduction of negative reference rates, primarily driven by changes in the cointegration relationship between bank-specific lending rates and the 3-month Euribor. Additionally, by including the ECB Deposit Facility in our cointegration model, we capture the direct impact of the Targeted Long-Term Refinancing Operations on the lending rate.
- JEL Code:
- C33,G21,E58,E43
- 18 March 2025
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The ECB BlogDetails
- JEL Code:
- J50
- Subtitle:
- As the normalisation of the Eurosystem balance sheet progresses, the aggregate amount of central bank liquidity available to banks in the euro area will fall over the coming years. This blog explains the role played by the Eurosystem’s refinancing operations within the operational framework for monetary policy implementation. The ECB, both as a monetary policy authority and as a supervisor, expects that banks should consider these operations as an integral part of their day-to-day liquidity management.
- 17 March 2025
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Working Paper Series - Issue No. 3038Details
- Abstract:
- Are restrictions on fiscal policy necessary for monetary policy to be able to deliver price stability? When households are Ricardian, the net present value of future fiscal surpluses needs to equate the real value of government debt absent inflation. We show that when households are not Ricardian, fiscal requirements still exist but take the very different form of a limit on the debt-to-GDP ratio. The debt-to-GDP limit captures the idea that public debt cannot be so large that the wealth effect of public debt on aggregate spending can no longer be counter-balanced by interest rate hikes, however large. To implement price stability when the debt-to-GDP requirement is satisfied, monetary policy must respond to the level of public debt, not just to the inflation it creates.
- JEL Code:
- E31,E62
- 17 March 2025
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Economic Bulletin - BoxEconomic Bulletin Issue 2, 2025Details
- Abstract:
- The ECB Consumer Expectations Survey (CES) provides regular and timely information on household rent expenditure. This information has been used to analyse developments and to construct an indicator for rent growth that is largely free of composition effects from respondents entering or leaving the panel of survey respondents. Combined with the rich micro data from the CES, this new indicator allows for a detailed analysis of rent growth and its drivers. According to this novel CES-based indicator, rent growth in the euro area peaked in the third quarter of 2023. It then declined but has remained above 3% up to the third quarter of 2024. Given the ease with which rent adjustments can be made, rent growth per square metre has been more than proportionally driven by new rental contracts.
- JEL Code:
- C43,E31,E51
- 17 March 2025
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Economic Bulletin - ArticleEconomic Bulletin Issue 2, 2025Details
- Abstract:
- This article reviews developments in the euro area housing market during the recent house price cycle and compares them with previous cycles. The recent downturn in house prices was relatively mild and short-lived, as well as less pervasive, compared with the global financial crisis and the sovereign debt crisis and implied smaller adjustments to overvaluations. This limited decline in house prices effectively unwound the exceptional pandemic-related surge in housing demand and, therefore, did not bear the same hallmarks as an outright recession. This is because income remained solid owing to the favourable labour market conditions and excess savings had also accumulated during the pandemic. The role of tighter financing conditions in the adjustment of house prices was mitigated by relatively sound balance sheet positions, reflecting the macroprudential measures undertaken in the aftermath of the global financial crisis, a stronger prevalence of fixed rate mortgages and links between the housing and the rental market. With the combination of prevailing supply-side shortages and continuing sound demand fundamentals, house price developments may well continue on their upward path but still remain uncertain.
- JEL Code:
- E31,E32,R31
- 16 March 2025
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InterviewDetails
- Subtitle:
- Interview with Luis de Guindos, Vice-President of the ECB, conducted by Jon Ihle
- 14 March 2025
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Occasional Paper Series - Issue No. 370Details
- Abstract:
- Greenwashing is a generic term used for breaches and misleading claims about the sustainability credentials of various legal provisions, ranging from unfair competition, securities laws infringements and unethical advertising to wrong corporate disclosure. This paper focuses on the latter. Against the background of the significant financial flows needed to finance the transition to meet the objectives of the Paris Agreement and the EU Climate law, the EU corporate sustainability reporting rules integrated in the Corporate Sustainability Reporting Directive (CSRD) and the Corporate Sustainability Due Diligence Directive (CSDDD), as well as the EU taxonomy constitute an ambitious legislative framework which is aimed at establishing common mandatory European Sustainability Reporting Standards for companies to report comparable and relevant information required by investors and other stakeholders. This framework’s aim is to support companies in the transition to a more sustainable economy and help stakeholders and investors understand the sustainability risks in their investments (and facilitate financial flows for the transition). This framework’s aim is to support companies in the transition to a more sustainable economy and help stakeholders and investors understand the sustainability risks in their investments (and facilitate financial flows for the transition). This will help mitigate greenwashing risks because this framework raises the responsibility for inaccurate disclosure. In addition, accurate data are important for central bank operations because they can ensure that prices and the risk control framework adequately reflect climate physical and transition risks. The success of the regulatory framework will rely heavily on its credible implementation, including penalties, which will help anchor expectations and condition the behaviour of economic agents. […]
- 13 March 2025
- 13 March 2025
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Working Paper Series - Issue No. 3037Details
- Abstract:
- During his reign from 1979 to 2005, Pope John Paul II visited 129 countries, more than the 263 Popes before him combined. I document a significant increase in exports to trading partners with a relatively high share of Catholics following a Pastoral visit, leading to a non-negligible increase in aggregate exports. The biggest beneficiaries in terms of increased trade are visited countries that are at lower stages of economic development and have relatively few Catholics and weak trade links. The effect is absent for other prominent episodes, such as global sports events or visits by political dignitaries.
- JEL Code:
- Z12,O1,F1
- 12 March 2025
- 12 March 2025
- 12 March 2025
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Working Paper Series - Issue No. 3036Details
- Abstract:
- Physical climate risks can have a large regional impact, which can influence mortgage loans’ credit risk and should be priced by the lenders. Motivated by the relevance of climate change for financial intermediaries, our paper aims at analysing if physical climate risks are being reflected in residential real estate loan rates of banks. We show that on average banks seem to demand a physical climate risk premium from mortgage borrowers and the premium has increased over recent years. However, there is significant heterogeneity in bank practices. Banks that were identified as “adequately” considering climate risk in the credit risk management by the ECB Banking Supervision charge higher risk premia which have been increasing particularly after the publication of supervisory expectations. In contrast, the lack of risk premia of certain banks shows that ECB diagnostics in the Thematic Review on Climate were accurate in identifying the banks that need stronger supervisory focus.
- JEL Code:
- G12,G21,Q51,Q54,R32
- 12 March 2025
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Working Paper Series - Issue No. 3035Details
- Abstract:
- We field a series of experiments in a population-representative survey of European consumers to examine their attitudes towards the possible introduction of a digital euro. First, we show that a short video explaining the key features of the digital euro is effective in changing consumers’ beliefs about such a new form of payment and increases the likelihood of adoption by 12pp relative to a control group that is not shown the video. Second, we find that on aggregate consumers would allocate a relatively small fraction from a positive wealth shock to digital euros and their allocation to other liquid assets would be little affected. Third, holding limits in the range of €1,000 to €10,000 have insignificant differential effects on the composition of liquid asset holdings. We also show that a non-trivial fraction of consumers report that they will not adopt the digital euro due to strong preferences for existing forms of payment.
- JEL Code:
- E41,E58,D12,D14,G51
- 12 March 2025
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SpeechDetails
- Subtitle:
- Speech by Christine Lagarde, President of the ECB, at the 25th ECB and Its Watchers conference organised by the Institute for Monetary and Financial Stability at Goethe University Frankfurt
- 11 March 2025
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Weekly financial statementAnnexes
- 11 March 2025
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Weekly financial statement - Commentary
- 11 March 2025
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Occasional Paper Series - Issue No. 369Details
- Abstract:
- The European Union requires a single market for capital. Well-developed and integrated capital markets support economic growth and resilience across the region, offering benefits for businesses, households, and financial stability. This paper examines the importance of CMU in achieving five strategic objectives: supporting innovation and productivity, financing the twin transition, shoring up pension savings, strengthening alternatives to bank financing, and fostering convergence and inclusion. It highlights the progress made over the past decade, the challenges encountered, and the renewed impetus behind the CMU initiative. The paper proposes concrete steps to move forward, building on long-standing priorities supported by the ECB and the current policy debate on CMU. First, it suggests facilitating access to capital markets, via the creation of a new standard for a European savings and investment product. Second, it emphasises the importance of expanding capital markets across-borders which would be facilitated by improvements towards a more integrated supervisory ecosystem, an integrated trading and post-trading landscape leveraging on the potential benefits of digitalisation, and a more active securitisation market that does not compromise on financial stability. Third, the paper highlights the need to channel capital towards innovative and competitive firms by increasing opportunities for equity and venture capital financing. These actions should be complemented by longer-term initiatives, including continuing to address barriers stemming from the lack of harmonisation in insolvency, corporate and taxation regimes, designing a safe asset for Europe, completing the Banking Union, and promoting financial literacy and inclusion.
- JEL Code:
- E61,F36,G18,G24,G51,O16
- 10 March 2025
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Macroprudential Bulletin - Article - Issue No. 27Details
- Abstract:
- Cyberattacks pose greater risk to financial stability than ever before as they have grown in both number and magnitude. A macroprudential perspective on cyber resilience stress testing is needed because cyber incidents can have a systemic impact as their effects spread across the financial sector via confidence, operational and financial mechanisms. While broader stress-testing principles also apply to cyber stress testing, stress testers need to focus in particular on clearly defining the overall objectives, determining the institutional perimeter, identifying material risk propagation channels, focusing on tail risks, considering relevant behavioural responses and combining the outcomes of bottom-up and top-down exercises. Based on these principles, cyber resilience stress tests can be executed following a bottom-up as well as a top-down approach. Top-down models can complement bottom-up results by providing harmonised modelling of system-wide financial interlinkages, behavioural responses and second-round effects.
- JEL Code:
- G21,G28,D81,E58,C63
- 10 March 2025
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Survey of Monetary Analysts - Aggregate results
- 7 March 2025
- 7 March 2025
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InterviewDetails
- Subtitle:
- Interview with Isabel Schnabel, Member of the Executive Board of the ECB, conducted by Patricia Hecht and Beate Willms on 5 February 2025
- 7 March 2025
- 7 March 2025
- 7 March 2025
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The ECB BlogDetails
- JEL Code:
- J16,J30
- Subtitle:
- The gender gap in labour markets is narrowing. But this process has slowed down. The ECB Blog gives an overview of recent developments for all euro area countries.
- 6 March 2025
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Macroeconomic projections for the euro areaAnnexes
- 6 March 2025
- 6 March 2025
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Combined monetary policy decisions and statementRelated
- 6 March 2025
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Monetary policy statement
- 6 March 2025
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Monetary policy statementDetails
- Subtitle:
- Christine Lagarde, President of the ECB, Luis de Guindos, Vice-President of the ECB, Frankfurt am Main, 6 March 2025
Related- 6 March 2025
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Combined monetary policy decisions and statement
- 6 March 2025
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Monetary policy decision
- 5 March 2025
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MFI interest rate statistics
- 4 March 2025
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Disaggregated financial statement
- 4 March 2025
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Weekly financial statementAnnexes
- 4 March 2025
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Weekly financial statement - Commentary
- 28 February 2025
- 28 February 2025
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Other publication
- 28 February 2025
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Press release
- 28 February 2025
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InterviewDetails
- Subtitle:
- Contribution to Bancaria by Piero Cipollone, Member of the Executive Board of the ECB, based on remarks at the Crypto Asset Lab Conference on 17 January 2025
- 27 February 2025
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Monetary policy account
- 27 February 2025
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Monetary developments in the euro areaAnnexes
- 26 February 2025
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Digital Euro Preparation Phase - Scheme Rulebook Development Group documents
- 26 February 2025
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Digital Euro Preparation Phase - Scheme Rulebook Development Group documentsAnnexes
- 26 February 2025
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Digital Euro Preparation Phase - Scheme Rulebook Development Group documents
- 26 February 2025
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Digital Euro Preparation Phase - Scheme Rulebook Development Group documentsAnnexes
- 26 February 2025
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Digital Euro Preparation Phase - Scheme Rulebook Development Group documents
- 26 February 2025
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Working Paper Series - Issue No. 3034Details
- Abstract:
- Large-scale debt forbearance is a key policy tool during crises, yet targeting is challenging due to information asymmetries. Using transaction-level data from a Portuguese bank during COVID-19, we find that financially fragile households are more likely to enter forbearance, irrespective of income shocks. Mortgage payment suspension increases consumption and savings, but effects differ across households. Low liquid wealth and income are associated with a higher marginal propensity to consume. Additionally, ineligible households accessing forbearance show a higher propensity to consume than eligible ones. Our results suggest that observable household characteristics can help in the design of effective debt relief policies.
- JEL Code:
- E21,E62,G28,G50,H31
- 26 February 2025
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Occasional Paper Series - Issue No. 368Details
- Abstract:
- This paper provides an overview of recent analytical work conducted, under their own aegis, by experts from various European authorities and institutions in the field of crypto-asset monitoring. Currently, risks stemming from crypto-assets and the potential implications for central banking domains are limited and/or manageable, including as regards the existing regulatory and oversight frameworks. Nevertheless, the importance of monitoring developments in crypto-assets, raising awareness of the potential risks and fostering preparedness cannot be overstated. In light of this, this paper sets out the background to the establishment of the Crypto-Asset Monitoring Expert Group (CAMEG) in late 2023 to bring together experts from the Eurosystem’s central banks and from the European Systemic Risk Board (ESRB). It also provides abstracts of various papers and other analytical works presented at the inaugural CAMEG conference held on 24 and 25 October 2024. The conference aimed to take stock of analytical work and data issues in this area, while fostering European collaboration and monitoring in the field of crypto-assets. Finally, this paper outlines the prospective way forward for the CAMEG, focusing on gaining greater insight into data in this area and deepening analytical work on interlinkages, crypto-asset adoption and the latest trends.
- JEL Code:
- E42,G21,G23,O33
- 25 February 2025
- 25 February 2025
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Weekly financial statementAnnexes
- 25 February 2025
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Weekly financial statement - Commentary
- 25 February 2025
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SpeechDetails
- Subtitle:
- Keynote speech by Isabel Schnabel, Member of the Executive Board of the ECB, at the Bank of England’s 2025 BEAR Conference
Annexes- 25 February 2025
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Speech
- 24 February 2025
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Research Bulletin - Issue No. 128Details
- Abstract:
- We study how disruptions to the supply of foreign critical inputs (FCIs) might affect value added at different levels of aggregation. FCIs are inputs primarily sourced from extra-EU countries with highly concentrated supply, or consisting in advanced technology products, or which are key to the green transition. Using firm-level customs and balance sheet data for Belgium, Spain, France, Italy and Slovenia, our framework allows us to assess how much – and how differently – geoeconomic fragmentation might affect European economies. Our baseline calibration suggests that a 50% reduction in imports of FCIs from China and other countries with similar geopolitical orientations would result in sizeable losses of value added, with significant heterogeneity across firms, sectors, regions and countries, driven by the heterogeneous exposure of firms. Our findings show that the short-term costs of disruptions to the supply of FCIs can be substantial, especially if firms cannot easily switch away from these inputs.
- JEL Code:
- F10,F14,F50,F60
- 21 February 2025
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SpeechDetails
- Subtitle:
- Slides by Philip R. Lane, Member of the Executive Board of the ECB, at FIW-Research Conference on International Economics in Vienna, Austria
- 21 February 2025
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Governing Council decisions - Other decisions
- 21 February 2025
- 21 February 2025
- 20 February 2025
-
InterviewDetails
- Subtitle:
- Interview with Frank Elderson, conducted by NVDE
- 20 February 2025
-
The ECB BlogDetails
- JEL Code:
- J20,J30,J50,J60
- Subtitle:
- Euro area firms hold on to their workforce, despite poor economic conditions. For a significant share of workers this means a lower workload than usual. In turn, many put more money aside as they worry about job security and wages, as the ECB Blog shows.
- 20 February 2025
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Annual consolidated balance sheet of the Eurosystem - Issue No. 2024Related
- 20 February 2025
-
Annual Accounts
- 20 February 2025
-
Press release
- 20 February 2025
-
Annual AccountsRelated
- 20 February 2025
-
Annual consolidated balance sheet of the Eurosystem - Issue No. 2024
- 20 February 2025
-
Working Paper Series - Issue No. 3033Details
- Abstract:
- Questions about market power have become salient in macroeconomics. We consider the role of institutional structures in addressing these within a dynamic general equilibrium framework. Standard models account for monopoly profits as a lump-sum transfer to the representative agent. We label this an "incentive leakage," and show this to be a general characteristic of firm-optimal arrangements. We show that shareholder-operated or worker-operated firms that eliminate leakage can generate within-firm incentives that effectively reduce monopoly distortion in equilibrium. When all firms operate similarly, an additional general equilibrium effect arises through internalization of an aggregate demand externality. We characterize steady-state welfare across structures, and show how zero-leakage institutions lead to improvements towards the Golden Rule benchmark. Overall, our paper takes the first step towards an analysis of the macroeconomics of institutions without incentive leakage.
- JEL Code:
- E10,E22,E24,E25
- 20 February 2025
- 19 February 2025
-
InterviewDetails
- Subtitle:
- Interview with Isabel Schnabel, Member of the Executive Board of the ECB, conducted by Olaf Storbeck on 14 February 2025
- 19 February 2025
-
Working Paper Series - Issue No. 3032Details
- Abstract:
- We construct a New-Keynesian E-DSGE model with energy disaggregation and financial intermediaries to show how energy-related fiscal and macroprudential policies interact in affecting the euro area macroeconomy and carbon emissions. When a shock to the price of fossil resources propagates through the energy and banking sector, it leads to a surge in inflation while lowering output and carbon emissions, absent policy interventions. By contrast, imposing energy production subsidies reduces both CPI and core inflation and increases aggregate output, while energy consumption subsidies only lower CPI inflation and reduce aggregate output. Carbon subsidies instead produce an intermediate effect. Given that both energy subsidies raise carbon emissions and delay the “green transition,” accompanying them with parallel macroprudential policy that taxes dirty energy assets in bank portfolios promotes “green” investment while enabling energy subsidies to effectively mitigate the adverse effects of supply-type shocks, witnessed in recent years in the EA.
- JEL Code:
- E52,E62,H23,Q43,Q58
- 19 February 2025
-
Balance of payments (monthly)Annexes
- 19 February 2025
-
Balance of payments (monthly)
- 18 February 2025
-
Digital Euro Preparation Phase documentAnnexes
- 18 February 2025
-
Digital Euro Preparation Phase document
- 18 February 2025
-
Weekly financial statementAnnexes
- 18 February 2025
-
Weekly financial statement - Commentary
- 18 February 2025
-
SpeechDetails
- Subtitle:
- Speech by Piero Cipollone, Member of the Executive Board of the ECB, at an MNI Connect webcast
Annexes- 18 February 2025
-
Speech
- 18 February 2025
-
Working Paper Series - Issue No. 3031Details
- Abstract:
- This paper explores the impact of bank transparency on market efficiency by comparing banks that disclose supervisory capital requirements to those that remain opaque. Due to the informational content of supervisory capital requirements for the market this opacity might hinder market efficiency. The paper estimates an average 11.5% reduction in funding costs for transparent versus opaque banks. However, there is some heterogeneity in those effects. Transparency helps the market to sort across safer and riskier banks. Conditional on disclosure, the safest quartile of banks, those with a CET1 P2R lower than 1.5% of risk-weighted assets, benefits in average from 31.1% lower funding costs. The paper concludes that supervisory transparency is beneficial, supporting the view that supervisory transparency enhances market discipline by allowing markets to better evaluate and price the risk associated with each bank.
- JEL Code:
- D5,E5,E58,G18,G21
- 18 February 2025
-
Working Paper Series - Issue No. 3030Details
- Abstract:
- Does it pay to invest in green companies? In countries where a market for carbon is functioning, such as those within the European Union, our findings suggest that it should be beneficial. Using a sample of green and brown European firms, we initially demonstrate that green companies have outperformed brown ones in recent times. Subsequently, we develop a production economy model in which brown firms acquire permits to emit carbon into the atmosphere. We find that the presence of a well-functioning carbon market could account for the green equity premium observed in our data. Incorporating a preference for green financial assets is also unlikely to overturn our results.
- JEL Code:
- E32,Q51,G18
- Network:
- Challenges for Monetary Policy Transmission in a Changing World Network (ChaMP)
- 17 February 2025
-
Survey of Monetary Analysts
- 16 February 2025
-
Working Paper Series - Issue No. 3029Details
- Abstract:
- We document that compared to all other investor groups investment funds exhibit a distinctly procyclical behavior when financial-market beliefs about the probability of a euro-related, institutional rare disaster spike. In response to such euro disaster risk shocks, investment funds shed periphery but do not adjust core sovereign debt holdings. The periphery debt shed by investment funds is picked up by investors domiciled in the issuing country, namely banks in the short term and insurance corporations and households in the medium term.
- JEL Code:
- F34,F45,G23
- 16 February 2025
-
Working Paper Series - Issue No. 3028Details
- Abstract:
- We document that inflation risk in the U.S. varies significantly over time and is often asymmetric. To analyze the macroeconomic effects of these asymmetric risks within a tractable framework, we construct the beliefs representation of a general equilibrium model with skewed distribution of markup shocks. Optimal policy requires shifting agents’ expectations counter to the direction of inflation risks. We perform counterfactual analyses using a quantitative general equilibrium model to evaluate the implications of incorporating real-time estimates of the balance of inflation risks into monetary policy communications and decisions.
- JEL Code:
- E52,E31,C53
- 14 February 2025
- 14 February 2025
-
Working Paper Series - Issue No. 3027Climate change policies and technologies: diffusion and interaction with institutions and governanceDetails
- Abstract:
- Climate change is a global-scale structural change, affecting economies across the world, alongside global fragmentation, digitalisation and demographics. This paper analyses the diffusion of climate policies and technologies and the role of institutions and governance in that process. It discusses theory, models and data available to date, and the empirical evidence for the 20 European Union and all 40 countries covered by the OECD’s Environmental Policy Stringency index. The results indicate that institutions and governance have significant effects towards a greater speed and spread of diffusion of climate policies and technologies, and that separating the speed and spread effects is essential for assessing the green transition.
- JEL Code:
- E02,O11,Q20,Q55,Q58
- 13 February 2025
-
Digital Euro Preparation Phase documentAnnexes
- 13 February 2025
-
Digital Euro Preparation Phase document
- 13 February 2025
-
Digital Euro Preparation Phase document
- 13 February 2025
-
Digital Euro Preparation Phase document
- 4 March 2025
-
Digital Euro Preparation Phase document
- 13 February 2025
-
Working Paper Series - Issue No. 3026Details
- Abstract:
- Institutional investors, such as investment funds, are playing an increasingly important role in residential real estate markets. This raises the possibility that their actions might drive aggregate market outcomes and may change how and which macrofinancial shocks transmit to house prices. In a Bayesian vector autoregression setting, we show that a demand shock from institutional investors has a positive and persistent effect on aggregate euro area house price growth and mortgage lending volumes. Institutional investors also increase their purchase activity following a loosening of monetary policy. Exploiting regional heterogeneity in eight euro area countries, we show in a panel regression setting that institutional investors weaken the link between house price growth and local economic fundamentals, but strengthen the sensitivity to monetary policy and financial market developments.
- JEL Code:
- R31,E52,G23
- Network:
- Challenges for Monetary Policy Transmission in a Changing World Network (ChaMP)
- 13 February 2025
-
Working Paper Series - Issue No. 3025Details
- Abstract:
- Using supervisory data of alternative investment funds investing in bonds, I exploit the COVID-19 crisis to examine the effectiveness of redemption restrictions from a financial stability perspective. First, I find that redemption restrictions reduced outflows during the March 2020 market turmoil but did not result in higher outflows in the periods following the crisis episode. Second, I find that funds with higher redemption restrictions engaged less in procyclical cash hoarding during the COVID-19 crisis period, even after controlling for the size of their outflows. Third, I find that redemption restrictions do not have a significant impact on the sensitivity of investor inflows to good performance, but they significantly reduce the sensitivity of outflows to bad performance. These findings suggest that redemption restrictions can mitigate fragility in open-ended investment funds.
- JEL Code:
- G11,G15,G23
- 13 February 2025
-
Economic Bulletin
- 13 February 2025
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Economic Bulletin - BoxEconomic Bulletin Issue 1, 2025Details
- Abstract:
- Monetary policy communication is important for managing policy expectations and enhancing the effectiveness of central bank policy decisions. The prevalence of topics in the ECB’s communication has shifted over time with the focus of its work: from the creation and introduction of the euro to addressing financial crises with new policy instruments, and more recently, to tackling the effects of the 2021-22 inflation surges. The analysis shows that, while press releases and monetary policy statements following Governing Council meetings lead to significant immediate changes in asset prices, communication taking place between these meetings also has a meaningful impact, with a substantial cumulative effect over time. A holistic understanding of the impact of Governing Council communication – both immediately after its meetings and between one meeting and the next – is central for managing expectations and shaping monetary policy outcomes.
- JEL Code:
- E52,E58,E61
- 13 February 2025
-
Economic Bulletin - BoxEconomic Bulletin Issue 1, 2025Details
- Abstract:
- The collateral framework for Eurosystem credit operations contributes to an effective, robust, flexible and efficient implementation of the ECB’s monetary policy. The framework has evolved over time, primarily in response to economic and financial market developments, supporting bank lending and the provision of liquidity. Recent Governing Council decisions will increase the harmonisation of the framework, while simultaneously preserving a broad collateral basis.
- JEL Code:
- E58,E65,G01
- 13 February 2025
-
Economic Bulletin - BoxEconomic Bulletin Issue 1, 2025Details
- Abstract:
- Major floods have become recurrent events in Europe and their frequency is set to increase with climate change. Drawing on several pieces of ECB analysis, we show that the economic effects depend largely on economic and institutional factors at the regional level. There is evidence of high-income regions “building back better”, whereas lower-income regions can suffer prolonged periods of lower activity. Insurance and spending on adaptation measures like flood defences can already contain the potential damages from further extreme weather events in the near future.
- JEL Code:
- D24,E24,J22,R11,Q54
- 13 February 2025
-
Economic Bulletin - BoxEconomic Bulletin Issue 1, 2025Details
- Abstract:
- The euro area unemployment rate has been declining for the past two years. This box explores the role of labour supply factors in driving this decline. To this end, it examines in particular whether changes in the labour force composition of certain demographic groups have contributed to this trend. The results show that, even within the relatively short time frame considered, shifts in the labour force composition – and especially the rising proportions of older workers and workers with a tertiary education – have contributed to reducing the unemployment rate.
- JEL Code:
- E24,J11,J21
- 13 February 2025
-
Economic Bulletin - BoxEconomic Bulletin Issue 1, 2025Details
- Abstract:
- The inflation surge seen in the past few years has had a negative impact on consumer perceptions about real incomes. These perceptions seem to persist even as real income has actually improved over time. This behaviour, which can be seen as a form of pessimism, is particularly strong among lower and middle-income households and has had a negative impact on actual consumption. These findings underscore the importance of perceptions in economic behaviour. As pessimism following large economic shocks typically disappears, albeit gradually, consumption should gain momentum as perceptions about real incomes improve.
- JEL Code:
- D84,D91,E21,G51
- 13 February 2025
-
Economic Bulletin - BoxEconomic Bulletin Issue 1, 2025Details
- Abstract:
- While headline inflation has decelerated significantly across advanced economies in the past two years, services inflation has remained high. This box examines the key factors influencing services inflation in the United States and the United Kingdom, highlighting the role of labour market tightness and catch-up dynamics in non-rent services inflation, and the contribution of rent inflation to overall services inflation. Looking ahead, services inflation is expected to moderate amid a lower contribution from catch-up inflation dynamics, a cooling of labour markets and decreasing inflation for new rental agreements.
- JEL Code:
- E31,E24,C22,C32
- 12 February 2025
-
Working Paper Series - Issue No. 3024Details
- Abstract:
- We study the heterogeneous pass-through of monetary policy across firms with different labor shares. The goal is to obtain evidence on a labor-intensity transmission channel that should in fact be operating for other kinds of demand shocks as well. Our basic idea is that labor is special: unlike capital, it cannot be pledged against loans as collateral due to property rights. Based on a sample of over one million European firms, we document substantial heterogeneity in terms of firms’ investment response: when conditions tighten, fixed capital stock of labor-intensive firms decreases relative to capital-intensive production. These findings cannot be explained by other proxies for financial constraints such as age, size or financial leverage. Our results suggest that the impact of monetary policy is driven by borrowing constraints of high labor share firms, and that monetary policy is more potent in an economy characterized by a high labor share.
- JEL Code:
- D22,E52,D31,E23,E32
- 12 February 2025
-
Working Paper Series - Issue No. 3023Details
- Abstract:
- Following the Global Financial Crisis of 2007-8, Ireland, Slovenia, and Spain set up public Asset Management Companies (AMCs), purchasing delinquent loans equal to 44%, 16%, and 10% of GDP, respectively. Though deemed successful, it’s unclear if this was de facto traditional capital and liquidity support. We show that AMCs have a systematic advantage in reducing pecuniary externalities and costs associated with loan delinquencies. AMCs enhance average returns to bank lending, promoting additional lending (bank lending channel) and improving corporate borrowers’ balance sheets (balance sheet channel). The welfare gains of well-designed and well-managed AMCs are between 0.2% and 0.5% of steady-state consumption, independent of whether they are financed through fiscal transfers or sterilized monetary transfers; AMCs can complement traditional fiscal and monetary policies in managing financial crises.
- JEL Code:
- E44,G18,G21,G28
- 12 February 2025
-
SpeechDetails
- Subtitle:
- Introductory remarks by Frank Elderson, Member of the Executive Board of the ECB and Vice-Chair of the Supervisory Board of the ECB, at the MNI Webcast on Climate Change: Impact on Monetary Policy and Bank Supervision
- 12 February 2025
-
Economic Bulletin - ArticleEconomic Bulletin Issue 1, 2025Details
- Abstract:
- The green transition of the EU economy will require substantial investment to 2030 and beyond, to reduce greenhouse gas (GHG) emissions by 55% from 1990 levels by 2030 and reach net-zero emissions by 2050. Estimates of green investment needs vary and are surrounded by high uncertainty, but these all point to a requirement for faster and more ambitious action. Green investment will need to be financed primarily by the private sector, with support from the public sector. While banks are expected to make a key contribution to funding the green transition, capital markets need to deepen further, especially to support innovation financing. Public funds will be vital to complement and de-risk private green investment. Finally, structural reforms should be tailored to encourage firms, households and investors to step up their green investment activities.
- JEL Code:
- E22,E44,G21,Q41,Q50,Q58
- 12 February 2025
-
Economic Bulletin - ArticleEconomic Bulletin Issue 1, 2025Details
- Abstract:
- This article describes developments in wage indicators during and after the high inflation period. It illustrates that, following high volatility during the pandemic, all wage indicators recorded levels well in excess of historical averages in 2023-24. The drivers of wage growth, namely inflation, labour market tightness and productivity growth, also developed differently from how they have developed in the past, and there is a need to reassess how they are reflected in wage developments. Using the augmented wage Phillips curve we find that the inflationary shock was the main driver of wage growth dynamics in the period under investigation, while labour market tightness supported workers in recovering real wage losses. We illustrate the link between wage growth and inflation in the euro area through the lens of the Bernanke-Blanchard model. ECB wage tracker data confirm the important role of catching up in recent wage growth and point to labour market institutions having a strong role in the speed of pass-through of prices to wages. Meanwhile, wage pressures are expected to ease as real wage catch-up becomes less significant and labour demand eases.
- JEL Code:
- E24,J30,J52
- 11 February 2025
-
SpeechDetails
- Subtitle:
- Slides by Isabel Schnabel at the Nuremberg Talks Series' panel discussion organised by the Institut für Arbeitsmarkt- und Berufsforschung in Nürnberg, Germany
- 11 February 2025
-
Weekly financial statementAnnexes
- 11 February 2025
-
Weekly financial statement - Commentary
- 11 February 2025
-
Other publicationAnnexes
- 11 February 2025
- 11 February 2025
- 11 February 2025
- 11 February 2025
- 11 February 2025
- 11 February 2025
- 11 February 2025
- 11 February 2025
- 11 February 2025
- 11 February 2025
- 11 February 2025
- 11 February 2025
- 11 February 2025
-
The ECB BlogDetails
- JEL Code:
- E52,E60
- Subtitle:
- At the heart of the euro area’s competitiveness challenges lies weak productivity growth. The ECB Blog looks at how this makes it more difficult to carry out monetary policy.
- 11 February 2025
-
Economic Bulletin - ArticleEconomic Bulletin Issue 1, 2025Details
- Abstract:
- This article discusses the role institutions play in supporting European competitiveness and makes the case for urgent and concrete structural reforms. Productivity growth in Europe has been disappointingly low in the last three decades, which is closely linked to the shortcomings in firm dynamism, investment, breakthrough innovation and the diffusion of digital technology. Efficient and effective institutions at the national and EU levels are needed to support innovation and investment and boost productivity, which in turn will raise competitiveness. This is particularly important in the context of increased geopolitical tensions and the need to facilitate the digital and green transitions.
- JEL Code:
- O43,O32,O18,J24,F02
- 11 February 2025
-
Working Paper Series - Issue No. 3022Details
- Abstract:
- The digitalisation of payments has accelerated over the last decades with the internet and ever faster and cheaper computing. Now, many believe that decentralised finance (“DeFi”) offers fundamentally new possibilities for trading, payments and settlement. Moreover, for a few years central banks have launched work on what has been called retail and wholesale central bank digital currencies (“CBDC”). Concurrent to the rise of innovative technologies has been the advent of new terminology, which is widely used, but which often seems to be biased, confusing, or is used inconsistently. By providing an etymology of key concepts and reviewing terminology and definitions, this paper also provides a new approach to clarifying the essence of new technologies in the field of payments to facilitate ongoing discussions about their eventual merits and use cases.
- JEL Code:
- B26,E42
- 11 February 2025
-
Working Paper Series - Issue No. 3021Details
- Abstract:
- Homeownership rates and holdings of housing wealth differ immensely across countries. Using micro data from five economies, we estimate a life-cycle model with illiquid housing in which households face a discrete–continuous choice between renting and owning a house. We use the model to decompose the cross-country differences in the homeownership rate and the value of housing wealth into three groups of explanatory factors: house price expectations, the institutional set-up of the housing market and preferences. We find that all three groups of factors matter, although preferences less so. Differences in homeownership rates are strongly affected by (i) house price beliefs and (ii) the rental wedge, the difference between rents and housing maintenance costs, which reflects the quality of the rental market. Differences in the value of housing wealth are substantially driven by maintenance costs.
- JEL Code:
- D15,D31,D84,E21,G11,G51
- 10 February 2025
-
SpeechDetails
- Subtitle:
- Speech by Christine Lagarde, President of the ECB, at the plenary session of the European Parliament
- 7 February 2025
- 7 February 2025
-
Economic Bulletin - BoxEconomic Bulletin Issue 1, 2025Details
- Abstract:
- This box provides an update on estimates of the natural rate of interest, or r*, published in Issue 1, 2024 of the Economic Bulletin. r* is commonly referred to as the real rate of interest that is neither expansionary nor contractionary. Broad trends in r* can be used to gauge economic risks, such as the potential constraint of the lower bound on interest rates. However, estimating r* is fraught with wide-ranging uncertainties and conceptual limitations. These uncertainties stem from model selection, parameter estimation, filter techniques and variation in real-time data. The inherent uncertainty in estimating r* and its conceptual challenges limit its practical use to determine the appropriate stance of monetary policy at a specific point in time.
- JEL Code:
- E52,E43,C54
- 7 February 2025
-
Working Paper Series - Issue No. 3020Details
- Abstract:
- An increase of e100 per tonne in the EU carbon price reduces the carbon footprint but lowers GDP due to higher energy costs and carbon leakage. Using a dynamic multi-sector, multi-country model augmented with an energy block that includes endogenous renewable energy investment, we analyze the macroeconomic and emissions effects of a carbon price. Investment in renewable energy mitigates electricity price increases in the medium term, leading to a smaller GDP loss (up to -0.4%) and a larger emissions reduction (24%) in the EU. Neglecting renewable energy investment overestimates the negative economic impact. We also find that a Carbon Border Adjustment Mechanism (CBAM) reduces carbon leakage but slightly hurts GDP and inflation as the competitive gain is offset by the higher costs of imported intermediate inputs.
- JEL Code:
- C6,H2,Q5
- 6 February 2025
-
Working Paper Series - Issue No. 3019Details
- Abstract:
- This paper investigates the role of banking networks in the transmission of shocks across borders. Combining banking deregulation in the US with state-level idiosyncratic demand shocks, we show that geographically diversified banks reallocate funds from economies experiencing negative shocks to unaffected regions. Our findings indicate that in the presence of idiosyncratic shocks, financial integration reduces business cycle comovement and synchronizes consumption patterns. Our findings contribute to explaining the Great Moderation and provide empirical support for theories that predict that banking integration facilitates the insurance of region-specific risk and the efficient allocation of resources as markets become more complete.
- JEL Code:
- E32,F36,G21
- 6 February 2025
-
Working Paper Series - Issue No. 3018Details
- Abstract:
- Housing expenditure shares decline with income. A household’s income determines its sensitivity to housing costs and drives its location decision. Has spatial skill sorting increased because low income individuals are avoiding increasingly expensive regions? I augment a standard quantitative spatial model with flexible non-homothetic preferences to estimate the effect of the national increase in the relative supply of high skilled workers that has put upward pressure on housing costs in skill-intensive cities. My model explains 10% of the increase in average house prices in Germany from 2007 to 2017 and 11% of the regional differences in house price increases. One third of the effects is due to an increase in spatial skill sorting driven by differences in housing expenditure shares. The observed degree of skill sorting was not significantly different from the optimal allocation in 2007 while skill sorting was larger than optimal in 2017.
- JEL Code:
- H21,H23,R12,R21
- 6 February 2025
-
InterviewDetails
- Subtitle:
- Interview with Piero Cipollone, conducted by Balazs Koranyi and Francesco Canepa
- 5 February 2025
-
Legal act
- 5 February 2025
-
SpeechDetails
- Subtitle:
- Speech by Philip R. Lane, Member of the Executive Board of the ECB, at the Peterson Institute for International Economics (PIIE)
Annexes- 5 February 2025
- 5 February 2025
-
The ECB BlogDetails
- JEL Code:
- E52,E58
- Subtitle:
- The monetary policies of the ECB and the US Federal Reserve are not always in sync. But how does the Fed’s policy affect the euro area economy? This ECB Blog looks at how monetary policy in the United States travels across the Atlantic and what this means for the ECB.
- 5 February 2025
-
InterviewDetails
- Subtitle:
- Interview with Luis de Guindos, Vice-President of the ECB, conducted by Mário Blaščák
- 4 February 2025
-
Disaggregated financial statement
- 4 February 2025
-
Weekly financial statementAnnexes
- 4 February 2025
-
Weekly financial statement - Commentary
- 4 February 2025
-
€STR Transparency on errors
- 4 February 2025
-
MFI interest rate statistics
- 3 February 2025
-
Working Paper Series - Issue No. 3017Details
- Abstract:
- We study the implications of deviations from covered interest rate parity for international capital flows using novel data covering euro-area derivatives and securities holdings. Consistent with a dynamic model of currency risk hedging, we document that investors’ holdings of USD bonds decrease following a widening in the USD-EUR cross-currency basis (CCB). This effect is driven by investors with larger FX rollover risk and hedging mandates, and it is robust to instrumenting the CCB. These shifts in bond demand significantly affect bond prices. Our findings shed light on a new determinant of international capital flows with important consequences for financial stability.
- JEL Code:
- F21,F31,G11,G21,G22,G23,E44
- 3 February 2025
-
Working Paper Series - Issue No. 3016Details
- Abstract:
- This paper explores the impact of the regulatory leverage ratio (LR) on banks’ demand for reserves and thus the pricing of overnight liquidity in the euro area money markets. We use daily transaction-level money market data during the period between January 2017 - February 2023 and examine the two major overnight money market segments – the unsecured and the secured one, distinguishing between over-the-counter (OTC) and CCP-cleared trades for the latter. We find a significant positive link between a bank’s LR and the spread between its money market borrowing rate and the DFR. Banks with a higher LR offer deposits at higher interest rates, thereby reducing the markdown vis-à-vis the DFR. The impact of the LR dampens during the period in which central bank reserves did not count towards the LR exposure measure (or the denominator of the ratio). It is stronger for G-SIBs, who need to comply with a G-SIB LR add-on on top of the minimum requirement applicable to all euro area banks. Moreover, the impact is weaker for CCP-cleared transactions compared to OTC trades, likely reflecting the possibility to net bilateral exposures if cleared via CCPs, which effectively allows banks to finance the respective gross money market exposures with a smaller share of Tier 1 capital.
- JEL Code:
- G12,G21,G28
- 3 February 2025
-
Survey of Monetary Analysts - Aggregate results
- 1 February 2025
-
The ECB BlogDetails
- Subtitle:
- Remaining competitive is fundamental for Europe’s future. We need faster economic growth and higher productivity to protect the quality of life for Europeans – from their jobs and incomes to their security and welfare.
- 31 January 2025
- 31 January 2025
-
Governing Council decisions - Other decisions
- 31 January 2025
- 31 January 2025
- 31 January 2025
-
Working Paper Series - Issue No. 3015Details
- Abstract:
- This paper examines the great supply shock following the pandemic and the invasion of Ukraine, using a novel suite of supply indices. The suite has indices for the euro area total economy, euro area industries, sectors and countries. The suite also computes the contributions to the indices from supply drivers at origin, in transport, or at destination. The results from the suite show that the supply shock has had wide-spread effects, and that their dynamics have been industry-, sector- and country-specific. Supply conditions have been tighter for longer in the euro area than other areas, in automobile than digital and food industries, in services relative to other sectors, and in some countries than others. The drivers at home appear to account for an increasing share of the specificity at the end of the sample, and a broader data set helps to better capture these drivers. The results also confirm that the supply indices in the suite lag supply shocks and lead variables susceptible to the effects of supply shocks.
- JEL Code:
- C43,C82,E66,R32,R41
- 31 January 2025
-
Working Paper Series - Issue No. 3014Details
- Abstract:
- This paper investigates the growth impact of the EU’s Structural, Cohesion and Pre-accession Funds. We look at a large sample of 27 EU countries and the UK, over a period of 1989 and 2020, essentially covering the full history of these funds. We show that the growth effect of the funds is conditional on institutional quality: the funds contribute to economic growth only in countries with strong institutions: low corruption, strong rule of law, effective governments, and strong regulatory quality.Our research have important messages for the expected economic impact of the Next Generation EU (NGEU) and the Recovery and Resilience Facility (RRF). On the one hand, our findings highlight the risk that countries with weaker institutions – that also receive more funds - may use such funds less efficiently or wisely. On the other hand, countries that receive more RRF funds are also expected to introduce more structural reforms, some of which have the potential to improve institutional quality and thereby improve the effectiveness of the RRF and EU funds in general.
- JEL Code:
- O11,O43,O47
- 31 January 2025
-
Other publicationRelated
- 31 January 2025
-
Press release
- 31 January 2025
-
Press releaseRelated
- 31 January 2025
-
Other publication
- 31 January 2025
-
Press release
- 31 January 2025
- 31 January 2025
-
Economic Bulletin - BoxEconomic Bulletin Issue 1, 2025Details
- Abstract:
- This box summarises the findings of recent contacts between ECB staff and representatives of 82 leading non-financial companies operating in the euro area. According to these exchanges, which took place between 6 and 14 January 2025, business momentum remained subdued at the turn of the year as confidence in the manufacturing sector remained low, while services activity was more resilient. Price growth was moderate but had picked up slightly, mainly on account of rising energy and transport prices. Wage growth was expected to slow further both this year and next.
- JEL Code:
- E2,E3,L2
- 31 January 2025
-
Survey of Professional ForecastersAnnexes
- 31 January 2025
- 30 January 2025
-
Combined monetary policy decisions and statementRelated
- 30 January 2025
-
Monetary policy statement
- 30 January 2025
-
Monetary policy statementDetails
- Subtitle:
- Christine Lagarde, President of the ECB, Luis de Guindos, Vice-President of the ECB, Frankfurt am Main, 30 January 2025
Related- 30 January 2025
-
Combined monetary policy decisions and statement
- 30 January 2025
-
Monetary policy decision
- 30 January 2025
-
Monetary policy decisionRelated
- 30 January 2025
-
Combined monetary policy decisions and statement
- 30 January 2025
-
Monetary policy statement
- 30 January 2025
-
Payment instruments and systemsAnnexes
- 30 January 2025
-
Payment instruments and systems
- 29 January 2025
-
Monetary developments in the euro areaAnnexes
- 29 January 2025
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Monetary developments in the euro area
- 28 January 2025
- 28 January 2025
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Weekly financial statementAnnexes
- 28 January 2025
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Weekly financial statement - Commentary
- 28 January 2025
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Euro area economic and financial developments by institutional sector (full)
- 28 January 2025
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Press releaseRelated
- 28 January 2025
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Euro area bank lending survey
- 28 January 2025
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Euro area bank lending surveyAnnexes
- 28 January 2025
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Euro area bank lending survey - Annex
Related- 28 January 2025
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Press release
- 27 January 2025
- 27 January 2025
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Survey on the Access to Finance of Enterprises in the euro areaAnnexes
- 27 January 2025
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SAFE questionnaire
- 27 January 2025
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SpeechDetails
- Subtitle:
- Lamfalussy Lecture by Christine Lagarde, President of the ECB, at the Lamfalussy Lectures Conference organised by the Magyar Nemzeti Bank, pre-recorded in Frankfurt am Main on 15 January 2025
- 27 January 2025
- 21 January 2025
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Weekly financial statementAnnexes
- 21 January 2025
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Weekly financial statement - Commentary
- 20 January 2025
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Digital Euro Preparation Phase document
- 20 January 2025
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The ECB BlogDetails
- JEL Code:
- G20
- Subtitle:
- Stress tests are of crucial importance to assess banks’ resilience under adverse economic conditions. In previous stress tests, however, some banks submitted overly optimistic projections. Despite thorough quality assurance by supervisors, this behaviour makes it more likely that the risks some banks face are underestimated. To address this, we are now taking a closer look at insufficiently prudent projection submissions. In line with our supervisory focus on banks’ risk data aggregation and reporting capabilities, we are also looking more closely at poor data quality issues in stress tests.
- 20 January 2025
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T2S Harmonisation progress report
- 20 January 2025
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Survey on credit terms and conditions in euro-denominated securities financing and OTC derivatives marketsAnnexes
- 20 January 2025
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Other publication
- 20 January 2025
Related - 20 January 2025
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Press releaseRelated
- 20 January 2025
- 17 January 2025
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InterviewDetails
- Subtitle:
- Interview with Frank Elderson, Member of the Executive Board of the ECB and Vice-Chair of the Supervisory Board of the ECB, conducted by Arend Clahsen and Han Dirk Hekking
- 17 January 2025
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SpeechDetails
- Subtitle:
- Slides by Piero Cipollone, Member of the Executive Board of the ECB, at Crypto Asset Lab conference organised by the University of Milano-Bicocca
- 17 January 2025
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Balance of payments (monthly)Annexes
- 17 January 2025
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Balance of payments (monthly)
- 16 January 2025
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Monetary policy accountRelated
- 12 December 2024
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Monetary policy decision
- 16 January 2025
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Research Bulletin - Issue No. 127Details
- Abstract:
- Housing affordability is at the centre of the political debate in many euro area countries. With steadily increasing rents and house prices still high relative to historical standards, many young households, particularly in large cities, are devoting an ever larger share of their income to housing expenses, and are finding it increasingly hard to access their desired size and quality of housing. At the same time, in the aftermath of the global financial crisis, many authorities tightened credit conditions by introducing limits to mortgage debt for banks or for borrowers themselves (borrower-based measures). These interventions were successful in improving financial stability, which was their key objective. In this article we point to an overlooked potential downside of these policies and other restrictive shocks to credit: limiting access to mortgage credit and, therefore, to homeownership, can spill over into the rental market, pushing up rents and having a negative welfare impact on some households – particularly the young and those on low incomes.
- JEL Code:
- D15,E21,E30,E51,G51
- 15 January 2025
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Working Paper Series - Issue No. 3013Details
- Abstract:
- Flexibility has progressively become a distinctive feature of the implementation of the Eurosystem’s asset purchases. In its many manifestations, flexibility has also been used by asset managers in the daily selection of sovereign bonds to limit the impact of asset purchases on repo market specialness. This study shows that, since the inception of the Public Sector Purchase Programme, flexible purchases of bonds greatly mitigated the Eurosystem’s footprint on the repo market.
- JEL Code:
- E50,E52,E58,G10,G18
- 15 January 2025
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The ECB BlogDetails
- JEL Code:
- E37,E47,C15
- Subtitle:
- Central banks project future developments based on past data patterns and a set of assumptions. Crises can change economic structures, complicating this forecasting. The ECB Blog explains how scenario, risk and sensitivity analyses address the new uncertainty.
- 15 January 2025
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Macroprudential Bulletin - Focus - Issue No. 26Details
- Abstract:
- This box studies how euro area investment funds use repurchase agreements and margin lending to build up leverage. Hedge funds are more likely to be leveraged in non-euro currencies sourced from foreign banks. On average, financial leverage is relatively low and diversified, though pockets of risk and strong connections with the banking sector warrant continued monitoring.
- JEL Code:
- G11,G15,G23
- 15 January 2025
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Macroprudential Bulletin - Focus - Issue No. 26Details
- Abstract:
- Mandating the use of central clearing of government bond repos is one way to mitigate financial stability risks from the rise of the non-bank sector in these markets. By imposing stricter risk management practices, it can limit the build-up of excessive NBFI leverage ex ante and support intermediation capacity. However, its impact on market functioning and liquidity requires careful assessment.
- JEL Code:
- G18, G23, G28
- 15 January 2025
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Macroprudential Bulletin - Article - Issue No. 26Details
- Abstract:
- The aim of this article is to assess the scale and systemic nature of counterparty credit risk (CCR) stemming from banks’ derivatives activities and securities financing transactions. Using supervisory data, along with data collected from the EU-wide stress test carried out by the European Banking Authority in 2023, the article analyses the distribution of CCR across banks. It focuses on the concentration of risk within specific bank business models and products, and on links between the banking and NBFI sectors. It also examines not only the role of collateral in risk mitigation but also its potential negative impact on systemic risk. Exposures to CCR are concentrated in a group of global systemically important banks (G-SIBs) and investment banks, which play a vital intermediation role in European financial markets. Banks’s counterparties mainly operate in the non-bank financial intermediation (NBFI) sector. To quantify systemic risk in a network of CCR exposures, we use stress test techniques to see how widely hypothetical defaults among more vulnerable NBFI counterparties may spread across the banking system. In such an event, banks under European banking supervision may face considerable losses.
- JEL Code:
- G21,G23
- 15 January 2025
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Macroprudential Bulletin - Article - Issue No. 26Details
- Abstract:
- We use transaction-level data on the euro area repo market to assess the impact of the Financial Stability Board’s (FSB) recommended minimum haircut framework on leverage in non-bank financial institutions. We find that it would affect larger and more leveraged entities the most, indicating its capability to make a meaningful contribution to addressing risks from leverage in non-bank financial institutions.
- JEL Code:
- G18,G23,G28
- 15 January 2025
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Macroprudential Bulletin - Article - Issue No. 26Details
- Abstract:
- Synthetic leverage is a key source of vulnerability for the non-bank financial intermediation (NBFI) sector. Yet there is lack of consensus on how to measure it. In this article, we propose a novel methodological framework to measure synthetic leverage and apply it to interest rate swaps using data gathered under the European Market Infrastructure Regulation (EMIR). Our contribution is threefold. First, compared with notional-based measures of synthetic leverage, our formula is sensitive to changes in the underlying risk factor and thus reflects different degrees of resilience to interest rate shocks. Second, thanks to its duration-based approach, our methodology is particularly suitable as a policy tool for scenario analysis. Finally, by providing an estimate of the leverage risk that an institution faces through its derivatives positions, our framework makes it possible to investigate the potential implications for an NBFI entity’s overall exposure to liquidity and solvency risk.
- JEL Code:
- G10,G23,G28.
- 15 January 2025
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Macroprudential Bulletin - Article - Issue No. 26Details
- Abstract:
- This article develops a framework for assessing risks and formulating policies for leveraged alternative investment funds by integrating entity-level information for investment funds with transaction-level data on derivatives and repurchase agreements. Combining both types of data allows us to better understand the use of leverage in alternative investment funds and assess its implications for financial stability. Using a comprehensive set of risk metrics, our analysis identifies hedge funds and liability-driven investment (LDI) funds as the most vulnerable to leverage-related risks. We demonstrate the usefulness of our framework for risk assessment by analysing the sensitivity of leveraged funds to interest rate shocks. We find that LDI funds may face significant liquidity needs and mark-to-market losses. Hedge funds appear to be more resilient to this type of shock, but depending on their investment strategy, they could be sensitive to other risk factors. Our framework allows us to flexibly analyse other risk scenarios and to evaluate regulatory measures in terms of both their effectiveness and their precision in addressing potential vulnerabilities arising from leverage.
- JEL Code:
- G11,G15,G23.
- 15 January 2025
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Macroprudential Bulletin - Article - Issue No. 26Details
- Abstract:
- Leverage in the non-bank financial intermediation (NBFI) sector can be a source of systemic risk and amplify stress in the wider financial system. Policymakers are currently considering ways to address NBFI leverage risks, with the focus on containing the build-up of such risks ex ante. To achieve this, authorities need a broad toolkit that allows them first to identify leverage risks and then to address them. Taking advantage of recent improvements in data availability, this edition of the Macroprudential Bulletin explores novel approaches to identifying risks and designing policies. In doing so, it contributes to the wider ongoing debate on addressing risks from NBFI leverage.
- JEL Code:
- G11, G15, G23
- 15 January 2025
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SpeechDetails
- Subtitle:
- Speech by Luis de Guindos, Vice-President of the ECB, at the 15th edition of Spain Investors Day
- 14 January 2025
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Weekly financial statementAnnexes
- 14 January 2025
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Weekly financial statement - Commentary
- 14 January 2025
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SpeechDetails
- Subtitle:
- Slides by Philip R. Lane, Member of the Executive Board of the ECB, at HKIMR-ECB-BOFIT Joint Conference “Europe, Asia and the Changing Global Economy” in Hong Kong
- 13 January 2025
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Working Paper Series - Issue No. 3012Details
- Abstract:
- Inflation risk premiums tend to be positive in an economy mainly hit by supply shocks, and negative if demand shocks dominate. Risk premiums also fluctuate with risk aversion. We shed light on this nexus in a linear-quadratic equilibrium microfinance model featuring time variation in inflation-consumption correlation and risk aversion. We obtain analytical solutions for real and nominal yield curves and for risk premiums. While changes in the inflation-consumption correlation drive nominal yields, changes in risk aversion drive real yields and act as amplifier on nominal yields. Combining a trend-cycle specification of real consumption with hysteresis effects generates an upward-sloping real yield curve. Estimating the model on US data from 1961 to 2019 confirms substantial time variation in inflation risk premiums: distinctly positive in the earlier part of our sample, especially during the 1980s, and turning negative with the onset of the new millennium.
- JEL Code:
- E43,E44,C32
- 13 January 2025
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Euro area economic and financial developments by institutional sector (early)
- 13 January 2025
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Balance of payments (quarterly)
- 13 January 2025
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Survey of Monetary Analysts
- 13 January 2025
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InterviewDetails
- Subtitle:
- Interview with Philip R. Lane, Member of the Executive Board of the ECB, conducted by András Szigetvari
- 10 January 2025
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The ECB BlogDetails
- JEL Code:
- O47,O30,H50
- Subtitle:
- Investments in R&D typically foster productivity growth. But the funding source matters. The ECB Blog shows that publicly funded R&D complements private investments and has greater effects on productivity growth because of its larger spillovers.
- 9 January 2025
-
Working Paper Series - Issue No. 3011Details
- Abstract:
- Climate-linked bonds, issued by governments and supranational organizations, are pivotal in advancing towards a net-zero economy. These bonds adjust their payoffs based on climate variables such as average temperature and greenhouse gas emissions, providing investors a hedge against long-term climate risks. They also signal government commitment to climate action and incentivize stronger policies. The price differential between climate-linked bonds and nominal bonds reflects market expectations of climate risks. This paper introduces a model of climate risk hedging and estimates that approximately three percent of government debt in major economies could be converted into climate-linked bonds.
- JEL Code:
- E58,G12,G13,Q54
- 9 January 2025
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Working Paper Series - Issue No. 3010Details
- Abstract:
- Exploiting the recalibration of ECB’s outstanding central bank funding in 2022, we show that a sharp reabsorption of bank liquidity induces a tightening impact on credit supply, as intended when centralbanks reduce their balance sheets. The tightening originates from the sudden relative convenience for banks accustomed to large liquidity holdings to more rapidly adapt to the new environment. Moreover, we show that the associated reduction in credit supply has real economic effects.
- JEL Code:
- E51,E52,G21
- Network:
- Challenges for Monetary Policy Transmission in a Changing World Network (ChaMP)
- 9 January 2025
-
Economic Bulletin
- 9 January 2025
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Economic Bulletin - BoxEconomic Bulletin Issue 8, 2024Details
- Abstract:
- The recalibration of the third series of targeted longer-term refinancing operations (TLTRO III) in October 2022 led to an accelerated repayment schedule, bringing forward the fastest and largest ever decline in Eurosystem borrowing. This strengthened the transmission of policy rates to bank lending conditions. In just over two years, euro area banks repaid more than €2 trillion from TLTRO III. Banks adjusted their balance sheets to allow for the TLTRO repayments, using excess liquidity or raising additional funds via bonds and deposits. This reduction in liquidity and increased reliance on more expensive funding sources led banks to tighten their own lending conditions, thereby reinforcing the transmission of higher policy rates to bank lending.
- JEL Code:
- E51,E52,E58,G21,G28.
- 9 January 2025
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Economic Bulletin - BoxEconomic Bulletin Issue 8, 2024Details
- Abstract:
- This box describes Eurosystem liquidity conditions and monetary policy operations during the fifth and sixth reserve maintenance periods of 2024, running from 24 July to 22 October 2024.
- JEL Code:
- E40,E52,E58
- 9 January 2025
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Economic Bulletin - BoxEconomic Bulletin Issue 8, 2024Details
- Abstract:
- This box analyses the heterogeneous pass-through of monetary policy to goods and services inflation. The granular analysis examines the 72 prices of goods and services that comprise the Harmonised Index of Consumer Prices excluding energy and food (HICPX). Using an empirical model, we classify HICPX prices according to their sensitivity to monetary policy shocks, which varies considerably across items. While sensitive items account for a larger share of non-energy industrial goods than of services, the price responses of sensitive services are similar to those of sensitive goods. The March 2023 peak in the HICPX was driven by both sensitive and non-sensitive items. Recent data show a marked decline in the contribution of sensitive items, with non-sensitive services driving around two-thirds of recent HICPX inflation developments.
- JEL Code:
- E31,E52,C32
- 9 January 2025
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Economic Bulletin - BoxEconomic Bulletin Issue 8, 2024Details
- Abstract:
- This box investigates empirically the short-run effects of the European Union Emissions Trading System (EU ETS) on European gross fixed capital formation and European greenfield foreign direct investment (FDI) in the period 2003-19. While the EU ETS lowers greenhouse gas emissions by reducing entitlement rights and pricing them competitively, it can result in short-term cost disadvantages compared with foreign competitors, jeopardising and/or diverting investment away from Europe, as it is similar to a tax levied on companies operating in Europe. The empirical analysis in this box focuses on the impact of carbon price shocks and documents a small short-term drop in investment, driven by carbon-intensive industries, and a temporary decrease in greenfield FDI in Europe. At the same time, empirical evidence on the long-term impact indicates that the ETS also provides incentives for firms to invest in reducing the carbon intensity of their production processes and adopting more efficient technologies, increasing European energy independence.
- JEL Code:
- Q48,Q58,F21,E22
- 9 January 2025
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Economic Bulletin - BoxEconomic Bulletin Issue 8, 2024Details
- Abstract:
- This box explores the resilience of US equity markets since 2023 in spite of monetary policy tightening and persistent geopolitical tensions. Market dynamics have been driven by strong earnings growth expectations linked to advances in artificial intelligence, particularly for the so-called Magnificent Seven stocks, and by buoyant risk appetite. Elevated valuations and the significant stock market concentration make the US equity market vulnerable to adverse shocks, such as disappointing earnings or macroeconomic surprises.
- JEL Code:
- G12,G15,E44
- 9 January 2025
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Economic Bulletin - ArticleEconomic Bulletin Issue 8, 2024Details
- Abstract:
- This article explores how energy shocks influence capital and research and development expenditure in the EU and outlines possible implications for growth, productivity and competitiveness. The findings indicate that energy shocks can adversely affect corporate investment, potentially undermining future EU competitiveness, especially for financially constrained and energy-intensive firms. Policy measures at national and European level could help reduce energy prices and strengthen energy supply, making the EU less vulnerable to future energy shocks.
- JEL Code:
- Q41,Q43,O47,E22
- 9 January 2025
-
InterviewDetails
- Subtitle:
- Interview with Piero Cipollone, conducted by Federico Fubini
- 8 January 2025
-
Weekly financial statementAnnexes
- 8 January 2025
-
Weekly financial statement - Commentary
- 8 January 2025
-
The ECB BlogDetails
- JEL Code:
- R21,R31,J60
- Subtitle:
- The rise of working-from-home during the pandemic dramatically changed the way we organise work. And teleworking is transforming more than just our professional lives: The ECB Blog looks at how this shift is affecting the housing market and inequality.
- 8 January 2025
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Occasional Paper Series - Issue No. 367Investing in Europe’s green future: green investment needs, outlook and obstacles to funding the gapDetails
- Abstract:
- The green transition of the EU economy will require substantial investment to 2030 and beyond. Estimates of green investment needs vary between institutions and are surrounded by high uncertainty, but they all point to a requirement for faster and more ambitious action. Green investment will need to be financed primarily by the private sector. While banks are expected to make a key contribution to funding the green transition, capital markets need to deepen further, especially to support innovation financing. Progress on the capital markets union would support the green transition. Public funds will be vital to complement and de-risk private green investment. Structural reforms and enhanced business conditions should be tailored to encourage firms, households and investors to step up their green investment activities.
- JEL Code:
- E22,E44,G21,Q41,Q50,Q58
- 8 January 2025
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Occasional Paper Series - Issue No. 366Details
- Abstract:
- Two phenomena are increasingly reshaping the world economy. One is the growing and well-documented importance of climate transition policies that differ across countries. The other is the stark rise of geoeconomic fragmentation (GEF) concerns. While differences in climate transition policies are not new, they could amplify GEF, which is a new, growing risk. Conceptually, GEF is a policy-driven reversal of global economic integration, guided by strategic considerations such as national security, sovereignty, autonomy, or economic rivalry. It does not include reversals to global economic integration that are driven by autonomous change, such as shifts in technology, demographics or preferences, or policies motivated primarily by prudential or environmental concerns and labour or human rights. GEF propagates via all the channels through which countries engage with each other economically and politically to provide global public goods such as climate change mitigation. The steep rise in trade and investment restrictions points to coming headwinds which could be compounded by uncoordinated climate transition policies. Conversely, GEF could make transition policies more difficult as, together with their prerequisites – such as shared regulatory approaches, knowledge sharing and financial aid to less well-off countries – they hinge on effective cross-border coordination and collaboration. There is a considerable risk that GEF may hinder climate transition policies. The report is structured as follows. The first section sheds light on how climate policies may contribute to GEF. The second section analyses the extent to which GEF could hinder the green transition. The last section discusses gaps and avenues for further analytical and model-based work.
- JEL Code:
- F52,F64,H87,Q54
- 8 January 2025
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Economic Bulletin - BoxEconomic Bulletin Issue 8, 2024Details
- Abstract:
- After rising during the pandemic, the household saving rate in the euro area fell back to its pre-pandemic average by mid-2022. Since then, it has risen again noticeably, in the wake of recent severe economic shocks. Empirical evidence suggests that rising real incomes and high real interest rates, together with negative real wealth effects, have pushed up household savings over the last two years. With these factors likely to persist for some time, the saving rate is expected to remain high in the near term, although it is likely to settle below its current level.
- JEL Code:
- D11,D84,E31
- 8 January 2025
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Economic Bulletin - BoxEconomic Bulletin Issue 8, 2024Details
- Abstract:
- High levels of economic uncertainty may push households and firms to postpone spending and investment decisions, which could dampen economic activity. Given that uncertainty is not directly observable, this box assesses recent signals from a number of uncertainty measures that are derived from statistical methods, surveys, financial data and textual analysis. There is currently a divergence between the relatively low uncertainty indicated by measures associated with the short-term economic situation and the still high – and rising – uncertainty reflected in measures related to longer-term policy issues. Analysis based on a simple empirical framework suggests that increasing uncertainty, especially about economic policies, dampens real GDP, consumption and particularly business investment.
- JEL Code:
- D11,D84,E31
- 7 January 2025
-
Working Paper Series - Issue No. 3009Details
- Abstract:
- Banks are reluctant to tap central bank backup liquidity facilities and use the borrowed funds for loans to the real economy. We show that excessively parsimonious borrowing and lending can arise in a stigma-free model where the banking sector has an incentive to overissue deposits. Banks don’t heed the central bank’s call for more credit to finance investment because they simply ignore the collective gains from stronger activity in their atomistic decisions. Central banks can address this market failure by disintermediating market-based finance. A lender-of-last-resort (LOLR) system in which the central bank offers liquidity liberally but on non-concessionary conditions improves over a pure laissez-faire arrangement, where asset liquidation in the marketplace is the only source of emergency liquidity. But under LOLR banks remain reluctant to intermediate. Credit easing (CE) and quantitative easing (QE), instead, can stimulate bank borrowing and repair the broken nexus between liquidity provision and credit. Empirical analysis using bank-level and loan-by-loan data supports our model predictions. We find no empirical connection between loans and borrowed reserves obtained from conventional refinancing facilities. In contrast, there is a robust connection between loans and structural sources of liquidity: reserves borrowed under a CE program or non-borrowed, i.e. acquired from a QE injection. We also find that firms with greater exposure to banks borrowing in a CE program or holding larger volumes of non-borrowed reserves increase employment, sales, and investment.
- JEL Code:
- E5,E43,G2
- Network:
- Challenges for Monetary Policy Transmission in a Changing World Network (ChaMP)
- 7 January 2025
-
Working Paper Series - Issue No. 3008Details
- Abstract:
- To what extent can private firms’ external equity substitute for debt financing in a banking crisis? To answer this question, I use firm-level data and firm-bank linkages to estimate the causal effect of an imported lending cut from a large German bank on firms’ capital structure and real outcomes. The estimates imply that for every 1 euro reduction in debt, private firms in Germany received 0.27 euros of external equity. Firm-owner linkages indicate that outsiders provided equity funds in 40% of the firms that received an equity injection, while existing owners provided the funds in the rest. These findings highlight the importance of multiple sources of financing that can serve as backup facilities when the primary source of intermediation fails. The results also have implications for Macro-Finance heterogeneous firm models that typically overlook the role of equity financing.
- JEL Code:
- G01,G21,G32,E32,E44
- 7 January 2025
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Economic Bulletin - ArticleEconomic Bulletin Issue 8, 2024Details
- Abstract:
- NextGenerationEU (NGEU) is the largest ever programme of the EU and aims to support its economic recovery after the pandemic crisis and to modernise economies, with a focus on digital and green transformation. This article provides an updated description of the implementation effort as well as an assessment by ECB staff on the impact on the euro area economy. Based on a variety of models and scenarios, it is estimated that the public expenditures and structural reforms linked to NGEU will have a positive impact on euro area output, while the impact on inflation is expected to be muted. The expected positive effect on potential output should help reduce government debt ratios, as projected for the main beneficiary euro area countries. Compared with the initial assessment by ECB staff from 2022, the macroeconomic impact of NGEU is expected to materialise later but to be of similar size. Delays in the implementation of NGEU-linked expenditures and reforms are the key factor behind this reprofiling. The cumulated estimate remains broadly unchanged in the presence of two opposite forces: first, an increase in the nominal RRF-related investment financing grants to euro area countries and second, the unanticipated inflation which eroded the real value of the funds.
- JEL Code:
- C54,E02,E22,E62,F45,H87,O52
- 7 January 2025
-
MFI interest rate statistics
- 7 January 2025
-
Press release
- 6 January 2025
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The ECB BlogDetails
- JEL Code:
- G11,G12,G15
- Subtitle:
- When returns on safe assets fall, investors move some of their money to riskier assets. This ECB Blog shows: US Treasuries are replaced by global bonds, while German Bunds substitutes are mostly from Europe. This effect is smaller in times of market stress.
- 6 January 2025
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Economic Bulletin - ArticleEconomic Bulletin Issue 8, 2024Details
- Abstract:
- In the aftermath of the COVID-19 pandemic, the euro area labour market showed remarkable resilience despite weak economic growth and various challenges, including supply chain disruptions, the energy crisis and geopolitical tensions. The relative strength of the labour market compared with economic activity led to a marked decline in measures of labour productivity. Factors such as reduced real wages, increased profit margins, lower average hours worked and strong labour force growth contributed to favourable labour market dynamics, encouraging firms to hire or retain workers. Looking ahead, there are signs of easing in the labour market as some of the factors sustaining employment subside, aligning labour market dynamics more closely with economic activity. Nevertheless, structural issues, such as declining average hours worked and labour force dynamics, may persist.
- JEL Code:
- E24,J2
- 3 January 2025
-
SpeechDetails
- Subtitle:
- Slides by Philip R. Lane, Member of the Executive Board of the ECB, at AFA panel on geopolitical fragmentation at 2025 ASSA annual meeting in San Francisco
- 2 January 2025
-
Monetary developments in the euro areaAnnexes
- 2 January 2025
-
Monetary developments in the euro area
- 31 December 2024
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Disaggregated financial statement
- 31 December 2024
-
Weekly financial statementAnnexes
- 31 December 2024
-
Weekly financial statement - Commentary
- 24 December 2024
-
Weekly financial statementAnnexes
- 24 December 2024
-
Weekly financial statement - Commentary
- 20 December 2024
-
InterviewDetails
- Subtitle:
- Interview with Luis de Guindos, Vice-President of the ECB, conducted by Wouter van Bergen and Martin Visser
- 20 December 2024
-
Governing Council statement
- 19 December 2024
- 19 December 2024
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Press releaseRelated
- 19 December 2024
-
Details
- Summary:
- Results of a study on the payment attitudes of consumers in the euro area
- 19 December 2024
-
Balance of payments (monthly)Annexes
- 19 December 2024
-
Balance of payments (monthly)
- 18 December 2024
-
Occasional Paper Series - Issue No. 365Details
- Abstract:
- In light of recent global economic and geopolitical shocks threatening trade openness, this report aims to shed light on geoeconomic fragmentation and develops a rich set of new tools to assess its economic effects and implications for central banks. The report shows that, although global trade integration has largely withstood recent disruptions and the rise of inward-looking policies, selective decoupling between few trading partners (United States vis-à-vis China, western economies vis-à-vis Russia) and for specific products (such as advanced technologies) is occurring. Survey data show that, although European firms are reorganising supply chains critical foreign dependencies persist. A firm-level stress test reveals that sudden disruptions in the supply of critical inputs from high-risk countries would lead to significant, albeit very heterogeneous, economic losses across firms, regions and sectors. Addressing foreign dependencies with broad-based protectionism policies, however, is self-defeating. In an extreme counterfactual scenario involving prohibitive and across-the-board trade barriers between geopolitical blocs, global GDP could decline by up to 9% coupled with an increase in global inflation of 4 percentage points in the first year, with the impact persisting for at least five years. It is conceivable that trade fragmentation will unravel over the course of a number of years, with supply disruptions becoming more frequent and severe than in the past. If this process should ultimately lead to a less interconnected global economy, countries might suffer from increased volatility and price pressures, as shocks cannot be easily diversified away through trade. [...]
- JEL Code:
- F13,F14,F51,F52,F61,F62,E31,E50
- 18 December 2024
-
Press release
- 18 December 2024
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The ECB BlogDetails
- Subtitle:
- The growth of negotiated wages is expected to ease in 2025. This is the information emerging from the ECB wage tracker, which we will publish on a regular basis from now on. The ECB Blog explains the tool and how it can help monitor wage pressures in the euro area.
- 18 December 2024
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Digital Euro Preparation Phase documentAnnexes
- 18 December 2024
-
Digital Euro Preparation Phase document
- 19 February 2025
-
Digital Euro Preparation Phase document
- 18 December 2024
-
Digital Euro Preparation Phase documentAnnexes
- 18 December 2024
-
Digital Euro Preparation Phase document
- 17 January 2025
-
Digital Euro Preparation Phase document
- 18 December 2024
-
Working Paper Series - Issue No. 3007Details
- Abstract:
- We assess Euro Area financial integration correcting for the role of “onshore offshore financial centers” (OOFCs) within the Euro Area. The OOFCs of Luxembourg, Ireland, and the Netherlands serve dual roles as both hubs of investment fund intermediation and centers of securities issuance by foreign firms. We provide new estimates of Euro Area countries’ bilateral portfolio investments which look through both roles, attributing the wealth held via investment funds to the underlying holders and linking securities issuance to the ultimate parent firms. Our new estimates show that the Euro Area is less financially integrated than it appears, both within the currency union and vis-à-vis the rest of the world. While official data suggests a sharp decline in portfolio home bias for Euro Area countries relative to other developed economies following the introduction of the euro, we demonstrate that this pattern only remains true for bond portfolios, while it is artificially generated by OOFC activities for equity portfolios. Further, using new administrative evidence on the identity of non-Euro Area investors in OOFC funds, we document that the bulk of the positions constituting missing wealth in international financial accounts are now accounted for by United Kingdom counterparts.
- JEL Code:
- F3,F4,G2,G3,H26
- 18 December 2024
-
Press releaseRelated
- 18 December 2024
- 18 December 2024
-
Other publication
- 18 December 2024
-
€STR Annual Methodology Review
- 18 December 2024
-
SpeechDetails
- Subtitle:
- Speech by Philip R. Lane, Member of the Executive Board of the ECB, MNI Webcast
Annexes- 18 December 2024
- 17 December 2024
-
Weekly financial statementAnnexes
- 17 December 2024
-
Weekly financial statement - Commentary
- 17 December 2024
-
Working Paper Series - Issue No. 3006Details
- Abstract:
- Trust in the central bank is an essential ingredient for a successful conduct of monetary policy. However, for many central banks trust has recently declined, for instance in the wake of the post-pandemic inflation surge, due to large errors in central banks’ inflation forecasts, or given problems when exiting from forward guidance. The rapid, substantial and persistent erosion of trust makes it clear that trust needs to be earned continuously. This paper reviews why trust is important, what determines it and how central banks can enhance it. It also argues that it is important for central banks to improve the measurement and monitoring of trust. It ends by highlighting some future challenges for maintaining trust.
- JEL Code:
- E52,E58,G53
- 16 December 2024
-
SpeechDetails
- Subtitle:
- Keynote speech by Isabel Schnabel, Member of the Executive Board of the ECB, at the CEPR Paris Symposium 2024 hosted by the Banque de France
Annexes- 16 December 2024
- 16 December 2024
-
Working Paper Series - Issue No. 3005Details
- Abstract:
- Adaptation needs are vast, rising fast and difficult to determine in their entirety, especially with uncertain adverse scenarios due to climate inertia and implementation lags. Adaptation is hindered by a lack of a unified understanding of what it necessitates; the challenge in pointing out its costs, benefits, and residual risks; insufficiently prescriptive policy and legal frameworks; and the growing financing gap. Conversely, we now have better granular climate data to study the impacts of climate hazards and forecast climate risks; there is awareness that adaptation choices must be dynamic and reactive; and there is an increasing pool of case studies from which to learn. There is evidence that efficient adaptation investments can yield “triple-dividends” helping to close the financing gap. There is a need to absorb and smooth the impacts of rising extreme climate events. Innovative financial instruments, such as catastrophe bonds and climate bonds, might support challenged insurance coverages.
- JEL Code:
- E52,Q54
- 16 December 2024
-
The ECB BlogDetails
- JEL Code:
- E31,E42,E47,E52
- Subtitle:
- Though overall inflation has come down a lot, domestic inflation remains stubbornly high. This is typical for monetary policy tightening cycles. To understand why, The ECB Blog looks at how monetary policy is transmitted to wages, profits and productivity.
- 16 December 2024
-
Occasional Paper Series - Issue No. 364Details
- Abstract:
- This paper looks back on the 25-year history of the ECB Survey of Professional Forecasters (SPF). Since its launch in the first quarter of 1999, it has served as an important input for policymaking and analysis, especially over the past five years, where the euro area has, following a period of low inflation, navigated a global pandemic, Russia’s invasion of Ukraine and an unprecedented surge in inflation. The survey has evolved over time and provides not only a long time series of economic expectations and forecasts, but also valuable insights on key topical issues and on economic risks and uncertainties. We show that, for each of the three main macroeconomic variables forecast – HICP inflation, real GDP growth and the unemployment rate – the track record of the ECB SPF in forecasting has been broadly comparable to that of the Eurosystem. In addition, its combination of quantitative point forecasts and probability distributions with qualitative explanations has provided useful input for macroeconomic analysis. Beyond analyses of the forecasts for the main macroeconomic variables, there are also two further sections that examine the technical assumptions (oil prices, policy rates, exchange rates and wages) underlying SPF expectations and an analysis and assessment of measures of macroeconomic uncertainty. Technical assumptions are shown to account for the lion’s share of the variance in the inflation forecast errors, while uncertainty is shown to have increased considerably relative to that which prevailed during the early years of the SPF (1999-2008). Looking ahead, the SPF – with its long track record, its large and broad panel (spanning both financial and non-financial forecasters) and committed panellists – will undoubtedly continue to provide timely and useful insights for the ECB’s policymakers, macroeconomic experts, economic researchers and the wider public.
- JEL Code:
- D84,E31,E37,E52,E66
- 16 December 2024
-
Survey of Monetary Analysts - Aggregate results
- 16 December 2024
-
SpeechDetails
- Subtitle:
- Speech by Christine Lagarde, President of the ECB, at the Bank of Lithuania’s Annual Economics Conference on “Pillars of Resilience Amid Global Geopolitical Shifts”, on the occasion of the 10th anniversary of euro introduction, Vilnius, Lithuania
- 16 December 2024
-
Research Bulletin - Issue No. 126Details
- Abstract:
- The “doom loop” or “sovereign-bank nexus” has been a key factor in the European debt crisis, driven by feedback between fiscal sustainability risks and financial stability. This Research Bulletin revisits the doom loop, examining strategic default incentives and the unintended effects of policy interventions. While limiting banks’ exposure to sovereign debt can break the doom loop, it may increase default risks by weakening governments’ repayment incentives. Similarly, measures like the ECB’s Transmission Protection Instrument (TPI) or European Safe Bonds (ESBies) can mitigate the doom loop but might introduce new vulnerabilities, requiring precise calibration. Counterintuitively, allowing banks to increase sovereign bond holdings during crises may stabilise markets by reducing default incentives. These findings underscore the complex trade-offs and the need for nuanced policy design at both national and monetary union levels.
- JEL Code:
- E44,E6,F34
- 13 December 2024
- 13 December 2024
- 13 December 2024
- 13 December 2024
-
Governing Council decisions - Other decisions
- 13 December 2024
-
Working Paper Series - Issue No. 3004Details
- Abstract:
- We provide a versatile nowcasting toolbox that supports three model classes (dynamic factor models, large Bayesian VAR, bridge equations) and offers methods to manage data selection and adjust for Covid-19 observations. The toolbox aims at simplifying two key tasks: creating new nowcasting models and improving the policy analysis. For model creation, the toolbox automatizes testing input variables, assessing model accuracy, and checking robustness to the Covid period. The toolbox is organized along a structured three-step approach: variable pre-selection, model selection, and Covid robustness. Non-specialists can easily follow these steps to develop high-performing models, while experts can leverage the automated tests and analyses. For regular policy use, the toolbox generates a large range of outputs to aid conjunctural analysis like news decomposition, confidence bands, alternative forecasts, and heatmaps. These multiple outputs aim at opening the "black box" often associated with nowcasts and at gauging the reliability of real-time predictions. We showcase the toolbox features to create a nowcasting model for global GDP growth. Overall, the toolbox aims at facilitating creation, evaluation, and deployment of nowcasting models. Code and templates are available on GitHub: https://github.com/baptiste-meunier/Nowcasting_toolbox.
- JEL Code:
- C22,C51,C52,C53,C55
- 13 December 2024
-
Occasional Paper Series - Issue No. 363Details
- Abstract:
- Supervisory data are typically not conceived for statistical purposes or considered “official statistics”, but they are disclosed to the public, either directly by the supervised institutions or indirectly by the competent authorities. This disclosure is required under Pillar 3 of the Basel framework on banking supervision. The aim of the framework is to promote market discipline, whereby market participants monitor the risks and financial positions of banks and take action to guide, limit and price their risk-taking to safeguard financial stability. The disclosure of supervisory data is therefore a public good. In addition, supervisory data can be a reliable source for official statistics such as financial accounts. On the other hand, the nature of supervisory data differs from that of standard official statistics and its quality is subject to a robust assessment framework, with distinct particularities. The aim of this paper is to analyse the EU supervisory reporting framework from an institutional and policy perspective, in view of its potential and desirable evolution over time, including its possible integration with the statistical framework. The paper is split into three main parts. First, it describes the historical and current EU institutional settings, including the role of the European Banking Authority (EBA) reporting framework and the role of the Single Supervisory Mechanism (SSM), focusing on the data quality assessment framework and the publication of supervisory statistics. […]
- JEL Code:
- C81,G21,G28,G38
- 12 December 2024
-
Legal conference proceedings
- 12 December 2024
-
Digital Euro Preparation Phase documentAnnexes
- 12 December 2024
-
Digital Euro Preparation Phase document
- 12 December 2024
-
Digital Euro Preparation Phase document
- 12 December 2024
-
Digital Euro Preparation Phase document
- 12 December 2024
-
Digital Euro Preparation Phase document
- 12 December 2024
-
Digital Euro Preparation Phase document
- 20 December 2024
-
Digital Euro Preparation Phase document
- 12 December 2024
-
Macroeconomic projections for the euro areaAnnexes
- 12 December 2024
-
Macroeconomic projections for the euro area
- 30 December 2024
- 12 December 2024
-
Combined monetary policy decisions and statementRelated
- 12 December 2024
-
Monetary policy statement
- 12 December 2024
-
Monetary policy decision
- 12 December 2024
-
Monetary policy statementDetails
- Subtitle:
- Christine Lagarde, President of the ECB, Luis de Guindos, Vice-President of the ECB, Frankfurt am Main, 12 December 2024
Related- 12 December 2024
-
Combined monetary policy decisions and statement
- 12 December 2024
-
Monetary policy decision
- 12 December 2024
-
Monetary policy decisionRelated
- 12 December 2024
-
Combined monetary policy decisions and statement
- 12 December 2024
-
Monetary policy statement
- 10 December 2024
-
Weekly financial statementAnnexes
- 10 December 2024
-
Weekly financial statement - Commentary
- 4 December 2024
-
InterviewDetails
- Subtitle:
- Contribution by Christine Lagarde, President of the ECB to The Economist
- 4 December 2024
-
SpeechDetails
- Subtitle:
- Speech by Christine Lagarde, President of the ECB, at the Hearing of the Committee on Economic and Monetary Affairs of the European Parliament
Annexes- 4 December 2024
- 4 December 2024
- 4 December 2024
-
Press releaseRelated
- 23 July 2024
- 4 December 2024
-
Integrated Reporting Framework document
- 4 December 2024
-
SpeechDetails
- Subtitle:
- Presentation by Piero Cipollone, Member of the Executive Board of the ECB, at the VII Conference on behavioural financial regulations and policies organised by the Herbert Simon Society
- 4 December 2024
-
MFI interest rate statistics
- 3 December 2024
-
Disaggregated financial statement
- 3 December 2024
-
Weekly financial statementAnnexes
- 3 December 2024
-
Weekly financial statement - Commentary
- 3 December 2024
-
The ECB BlogDetails
- Subtitle:
- At the height of the financial crisis Greece, Ireland, Portugal and Cyprus needed help. The international assistance came under the condition of economic adjustment aiming to restore financial stability, debt sustainability and growth. How did the four countries recover from their crises?
- 3 December 2024
-
Working Paper Series - Issue No. 3003Details
- Abstract:
- We document that about 33% of the core inflation basket in the euro area is sensitive to monetary policy shocks. We assess potential theoretical mechanisms driving the sensitivity. Our results suggest that items of a discretionary nature, as reflected in a higher share in the consumption baskets of richer households, and those with larger role of credit in financing their purchase, tend to be more sensitive.Non-sensitive items are more frequently subject to administered prices and include non-discretionary items such as rents and medical services. Energy intensity does not seem to drive our results and the sensitive items are not dominated by durable goods, but are relatively evenly split between goods and services. Estimations over different samples show that the impact of monetary policy shocks on sensitive core inflation has become larger recently.
- JEL Code:
- E30,E50,C32
- Network:
- Challenges for Monetary Policy Transmission in a Changing World Network (ChaMP)
- 3 December 2024
- 2 December 2024
-
Letters to MEPsRelated
- 2 December 2024
-
Digital Euro Preparation Phase - Progress Report
- 2 December 2024
-
Digital Euro Preparation Phase document
- 2 December 2024
-
Press releaseRelated
- 2 December 2024
-
Digital Euro Preparation Phase - Progress Report
- 2 December 2024
-
Digital Euro Preparation Phase - Progress Report
- 1 December 2024
-
Occasional Paper Series - Issue No. 362Details
- Abstract:
- This paper takes stock of the implementation of the NextGenerationEU (NGEU) programme in the euro area four years after its inception, focusing on its principal instrument, the Recovery and Resilience Facility (RRF). The paper provides an updated quantitative assessment of its past and future impact on the euro area economy, using a set of models and scenarios to account for the uncertainty that still surrounds the implementation of this programme. The public expenditures and structural reforms linked to the RRF have the potential to increase the level of euro area gross domestic product (GDP) by around 0.4-0.9% by 2026 and 0.8-1.2% by 2031, depending on capital productivity and the degree of absorption of RRF funds. The contribution of structural reforms to these output effects is expected to increase over time, while the initially prevailing impact of RRF-funded public expenditures fades away. We provide tentative empirical evidence that reforms have started to modestly improve the growth outlook of some euro area Member States by increasing their institutional quality. The expected long-run increase in output is in turn a key factor behind the decline in the government debt ratios we project for the main NGEU beneficiary euro area Member States. At the same time, we estimate that NGEU will have a limited impact on euro area inflation. Compared with previous ECB staff analysis published in 2022, the macroeconomic impact of NGEU, particularly on GDP and government debt ratios, is expected to shift over time due to widespread delays in the implementation of NGEU-linked expenditures and reforms. It is crucial that euro area Member States address implementation challenges over the remaining lifetime of this programme to fully reap its benefits.
- JEL Code:
- C54,E02,E22,E62,F45,H87,O52
- 29 November 2024
-
Governing Council decisions - Other decisions
- 29 November 2024
- 29 November 2024
-
Digital Euro Preparation Phase - Scheme Rulebook Development Group documentsAnnexes
- 29 November 2024
-
Digital Euro Preparation Phase - Scheme Rulebook Development Group documents
- 29 November 2024
-
Press release
- 29 November 2024
- 28 November 2024
-
SpeechDetails
- Subtitle:
- Remarks by Philip R. Lane, Member of the Executive Board of the ECB, at the 25th Anniversary of the Euro50 Group event at the Banque de France
- 28 November 2024
-
The ECB BlogDetails
- JEL Code:
- G23
- Subtitle:
- The European Commission is seeking the views of stakeholders on policies to guard against the build-up of systemic risk in the financial sector beyond banks. This ECB Blog post describes the pillars of a macroprudential approach for the so-called non-bank financial sector and explains the need to further develop the policy framework.
- 28 November 2024
-
Monetary developments in the euro areaAnnexes
- 28 November 2024
-
Monetary developments in the euro area
- 28 November 2024
-
Research Bulletin - Issue No. 125Details
- Abstract:
- Negative economic shocks can cause waves of investor pessimism about the resilience of banks, which, in turn, generate additional adverse macroeconomic effects. This is commonly cited as an explanation for the economic havoc wrought by the global financial crisis of 2007-08. We introduce the notion of pessimism in a real business cycle model, which is a standard framework for business cycle analysis. The possibility of waves of pessimism generates countercyclical demand from banks for liquid assets (e.g., bank reserves). With the model, we study the macroeconomic effects of the government supplying liquid assets and find that a policy of accommodating banks’ demand is effective in stabilising the economy. Finally, we support this finding with empirical evidence.
- JEL Code:
- E40,E41,E44,E50,E51,G01,G21
- 28 November 2024
-
InterviewDetails
- Subtitle:
- Interview with Christine Lagarde, President of the ECB, conducted by Roula Khalaf, Patrick Jenkins and Olaf Storbeck on 25 November 2024
- 27 November 2024
-
Working Paper Series - Issue No. 3002Details
- Abstract:
- The projected increase in extreme climate events in the coming decades is likely to exacerbate the existing productivity and demographic challenges facing Europe. We study the dynamic, medium-run macroeconomic effects of heatwaves, droughts and floods in 1160 EU regions through the lens of a local projections, difference in difference framework. Summer heatwaves and droughts lower medium-term output, but the impact from floods depends on regional income levels. High-income regions witness reconstruction activity, less wealthy regions do not. We find evidence of population decline in affected regions as well as adaptation spending post-event, which lowers regional productivity.
- JEL Code:
- D24,E24,J22,R11,Q54
- 27 November 2024
-
InterviewDetails
- Subtitle:
- Interview with Isabel Schnabel, Member of the Executive Board of the ECB, conducted by Mark Schrörs and Alexander Weber on 25 November 2024
- 26 November 2024
-
Weekly financial statementAnnexes
- 26 November 2024
-
Weekly financial statement - Commentary
- 26 November 2024
-
InterviewDetails
- Subtitle:
- Interview with Luis de Guindos, Vice-President of the ECB, conducted by Petri Sajari
- 25 November 2024
-
SpeechDetails
- Subtitle:
- Keynote speech by Philip R. Lane, Member of the Executive Board of the ECB, at the Bank of England Watchers’ Conference 2024, King’s College London
- 25 November 2024
-
Survey of Monetary Analysts
- 25 November 2024
-
InterviewDetails
- Subtitle:
- Interview with Philip R. Lane, Member of the Executive Board of the ECB, conducted by Guillaume Benoit on 19 November 2024
- 22 November 2024
-
SpeechDetails
- Subtitle:
- Speech by Isabel Schnabel, Member of the Executive Board of the ECB, at the BIS Colloquium in honour of Claudio Borio, Head of the Monetary and Economic Department, in Basel, Switzerland
Related- 14 November 2024
- 22 November 2024
- 22 November 2024
-
SpeechDetails
- Subtitle:
- Speech by Christine Lagarde, President of the ECB, at the 34th European Banking Congress: "Out of the Comfort Zone: Europe and the New World Order"
- 21 November 2024
-
SpeechDetails
- Subtitle:
- Slides by Philip R. Lane, Member of the Executive Board of the ECB, at the 27th Annual Research Conference “The Macroeconomic Effects of Geopolitical Uncertainty” organised by De Nederlandsche Bank in Amsterdam, Netherlands
- 21 November 2024
-
SpeechDetails
- Subtitle:
- Speech by Frank Elderson, Member of the Executive Board of the ECB and Vice-Chair of the Supervisory Board of the ECB, at the University of Cyprus, Nicosia
- 21 November 2024
-
SpeechDetails
- Subtitle:
- Introductory remarks by Piero Cipollone, Member of the Executive Board of the ECB, at the tenth meeting of the Euro Cyber Resilience Board for pan-European Financial Infrastructures
- 20 November 2024
- 20 November 2024
-
Financial Stability ReviewAnnexes
- 20 November 2024
-
Financial Stability Review
- 20 November 2024
-
Financial Stability Review - BoxFinancial Stability Review Issue 2, 2024Details
- Abstract:
- Structural liquidity mismatches within euro area investment funds are both a source and an amplifier of systemic risk. These funds often offer more favourable redemption terms than the liquidity of their holdings justifies, potentially creating financial stability risks. Negative market shocks can quickly lead to large investor outflows, necessitating substantial asset sales that exert downward pressure on asset prices. This can result in a self-reinforcing cycle of further outflows and increased volatility. Investment funds have a larger footprint in euro area corporate bonds, which tend to be less liquid than other assets. This makes corporate bonds especially susceptible to sharp price declines under forced sale conditions, heightening the likelihood of disorderly market corrections. By contrast, euro area sovereign bonds are relatively resilient due to their higher liquidity and the more diversified investor base, reducing the market impact of sales by specific types of investors. This analysis highlights the need for regulatory adjustments to better safeguard financial stability. Extending redemption notice periods for funds with less liquid assets is a key recommendation, as such measures can help stabilise markets during times of stress by allowing more orderly liquidation and reducing abrupt price impacts.
- JEL Code:
- G17,G23,G28,E44
- 20 November 2024
-
Financial Stability Review - BoxFinancial Stability Review Issue 2, 2024Details
- Abstract:
- This box examines the role of euro area banks in the intermediation of US dollar liquidity and maps the global structure of funding markets and their evolution. Euro area banks have significantly increased their involvement in US dollar repo and FX swap markets, particularly since the onset of the monetary policy tightening cycle in 2022. This increased intermediation exposes euro area banks and their counterparties to potential liquidity risks, especially during periods of market stress. The short-term nature of these markets, combined with high market concentration and the off-balance-sheet nature of FX swaps, can amplify the transmission of shocks. Central bank swap lines are crucial for providing dollar liquidity and mitigating these financial stability risks during times of stress.
- JEL Code:
- G15,F31,G21,G23
- 20 November 2024
-
Financial Stability Review - BoxFinancial Stability Review Issue 2, 2024Details
- Abstract:
- Understanding the drivers of the current downturn in commercial real estate (CRE) can provide insights into the outlook for the market and potential spillovers to the financial system and wider economy. This box uses a BVAR model to show that monetary policy and adverse CRE demand shocks have been the main factors pushing CRE prices down since the start of 2022. Alongside falling prices, asset write-downs have been the primary driver of the recent sharp drop in the headline profits of real estate firms. Moreover, in many cases real estate firms’ revenue growth has not kept pace with their financing costs, which has potential implications for their repayment capacity.
- JEL Code:
- R30,R33,E52
- 20 November 2024
-
Financial Stability Review - BoxFinancial Stability Review Issue 2, 2024Details
- Abstract:
- Recent episodes of widening sovereign bond spreads have led to renewed concerns about financial stability related to sovereign risk in the euro area. Against this backdrop, this box presents an empirical analysis of the shifts in financing conditions for both sovereigns and non-financial corporations, as well as changes in the sovereign bond holdings of domestic and foreign investors following a sovereign stress shock. The analysis finds that financing conditions for sovereigns and firms deteriorate after sovereign stress events, while financial and political uncertainty increase. When sovereign stress events occur, investment funds and global investors withdraw from euro sovereign debt markets, while domestic investors step in.
- JEL Code:
- F34,F45,G23
- 20 November 2024
-
Financial Stability Review - ArticleFinancial Stability Review Issue 2, 2024Details
- Abstract:
- This edition of the ECB’s Financial Stability Review (FSR) marks the 20th anniversary of its inaugural publication. The FSR was originally launched to help in preventing financial crises, and this special feature draws lessons from two decades of experience in identifying, analysing and communicating about systemic risks via this publication. Although risk analysis and risk communication are distinct processes, the special feature emphasises that they are inextricably intertwined in a seamless cycle where each informs and enhances the other. Effective risk identification is founded on the ability to combine structured, data-driven assessments with qualitative insights and expert judgement. Such an approach requires a comprehensive and adaptive framework that continuously integrates broad reviews of indicators with focused analyses on emerging risks. Early identification of vulnerabilities enables timely intervention, but the complex, non-linear way that the financial system functions means that flexibility remains essential. Clear and transparent communication of systemic risks supports this analytical process by shaping expectations and enhancing market discipline, creating a feedback loop that strengthens both policy response and risk awareness. However, central banks face the challenge of balancing communication frequency and depth in order to avoid false alarms while at the same time maintaining credibility. As the ECB’s FSR has evolved, it has sought to become more accessible and data-driven, while utilising diverse media channels to broaden its audience. Experience confirms that targeted, proactive communication reinforces financial stability by aligning policymakers and markets, underscoring the symbiotic relationship between risk analysis and effective communication in maintaining financial system resilience.
- JEL Code:
- D81,E58,G01
- 19 November 2024
-
Weekly financial statementAnnexes
- 19 November 2024
-
Weekly financial statement - Commentary
- 19 November 2024
-
Other publicationAnnexes
- 19 November 2024
- 19 November 2024
-
Press releaseRelated
- 19 November 2024
- 19 November 2024
- 19 November 2024
-
The ECB BlogDetails
- Subtitle:
- Meeting the EU’s climate neutrality targets calls for deep structural changes and significant private funding, requiring a healthy financial system. That’s why we’ve tested how resilient banks, investment funds and insurers are to stresses arising during the green transition. ECB Vice-President Luis de Guindos explains the findings.
- 19 November 2024
-
SpeechDetails
- Subtitle:
- Speech by Frank Elderson, Member of the Executive Board of the ECB and Vice-Chair of the Supervisory Board of the ECB, at the tenth Green Finance Forum “Innovate in Nature”
- 19 November 2024
-
Balance of payments (monthly)Annexes
- 19 November 2024
-
Balance of payments (monthly)
- 19 November 2024
-
Financial Stability Review - BoxFinancial Stability Review Issue 2, 2024Details
- Abstract:
- The continuing shift from active to passive investing in equity markets over the past decade raises questions about the implications for financial stability along three dimensions. First, empirical evidence suggests that passive investing may increase co-movement among stock returns, making markets more volatile. Second, passive funds may increase equity market concentration, potentially exposing investors to heightened idiosyncratic risks from the largest companies. And third, the ability of equity markets to absorb shocks may be inhibited by the growing concentration of liquidity at closing auctions impacted by passive investing. In summary, passive investing continues to provide benefits to individual investors but might also adversely affect market functioning, thus highlighting the importance of investor heterogeneity.
- JEL Code:
- G11,G12,G14,G23
- 18 November 2024
-
SpeechDetails
- Subtitle:
- Speech by Christine Lagarde, President of the ECB, at "Les Essentiels des Bernardins", Paris
- 18 November 2024
-
SpeechDetails
- Subtitle:
- Speech by Philip R. Lane, Member of the Executive Board of the ECB, at the SUERF Marjolin Lecture hosted by the Banca d’Italia
- 18 November 2024
-
Financial Stability Review - ArticleFinancial Stability Review Issue 2, 2024Details
- Abstract:
- Productivity growth in the euro area has been declining for several decades. In light of the importance of bank lending as a source of external funding for euro area firms, this special feature investigates the link between firm productivity and bank credit allocation. Bank credit in the euro area has been skewed towards sectors that have contributed only marginally to aggregate productivity growth, such as real estate. Additionally, bank loans tilted towards less-productive firms within the same sectors during the COVID-19 pandemic, supported by state credit guarantees. Banks with weaker balance sheets lent more to less-productive firms during this period than other banks did. The tilt towards less-productive firms could have an indirect effect on aggregate productivity if the survival of less-productive firms suppresses the profitability of more-productive competitors, discouraging market entry and investment. A more diversified external funding structure could help boost the productivity of euro area firms, to the benefit of financial stability.
- JEL Code:
- D24,E22,E44,G21
- 18 November 2024
-
SpeechDetails
- Subtitle:
- Speech by Luis de Guindos, Vice-President of the ECB, at the Frankfurt Euro Finance Week, organised by the dfv Euro Finance Group
- 16 November 2024
-
SpeechDetails
- Subtitle:
- Speech by Ms Schnabel, Member of the Executive Board of the ECB, at the Chicago Booth Conference on the Global Economy and Financial Stability, in London, UK
Related- 14 November 2024
- 15 November 2024
-
SpeechDetails
- Subtitle:
- Contribution by Piero Cipollone, Member of the Executive Board of the ECB, to the Centre for European Reform’s annual economics conference on “A European path to higher economic growth”
Annexes- 15 November 2024
-
Speech
- 15 November 2024
- 15 November 2024
-
Occasional Paper Series - Issue No. 361Details
- Abstract:
- Since the March 2023 banking turmoil, a policy debate has emerged concerning the unprecedented scale and speed of the observed deposit outflows. Have recent stress episodes and developments in technology structurally changed depositors’ behaviour? Are the Basel III liquidity coverage ratio (LCR) run-off assumptions for cash outflows still fit for purpose? Leveraging on monthly liquidity reporting for a sample of 110 significant institutions (SIs) between 2016 and 2024, we shed light on some stylised facts pertaining to the composition of deposit flows in the banking union. Overall, we find limited evidence of a structural change in the statistical behaviour of deposit flows to date. For all but one of the deposit classes included in the analysis, more than 90% of observable net outflows remained below the LCR run-off assumptions during the whole sample period. Some extreme deposit outflows recorded during the COVID-19 pandemic and for a few SIs assessed as failing or likely to fail (FOLTF) remain rare tail events for which the LCR standard was not designed.
- JEL Code:
- G20,G21,G28
- 14 November 2024
-
SpeechDetails
- Subtitle:
- Speech by Isabel Schnabel, Member of the Executive Board of the ECB, at the 25th Jacques Polak Annual Research Conference
Annexes- 14 November 2024
- 14 November 2024
- 14 November 2024
- 14 November 2024
-
Monetary policy accountRelated
- 17 October 2024
-
Monetary policy decision
- 14 November 2024
-
Working Paper Series - Issue No. 3001Details
- Abstract:
- Contractions in credit supply can lead firms to reduce their level of employment, yet little is known about how these shocks affect the composition of firms’ employees and outcomes at the worker level. This paper investigates how bank distress affects credit provision and its effects on employment beyond firm-level aggregates. To do so, we use a novel dataset built from administrative and tax records linking all banks, firms, and workers in Denmark. We show that banks that were particularly exposed to the 2008-09 financial crisis cut lending to firms, and firms were unable to fully compensate with financing from alternate sources. The decrease in credit supply led to a drop in firm-level employment, with effects concentrated among firms with low pre-crisis liquidity, and on employment of low-educated and nonmanagerial workers. At the worker level, we find that positive effects on unemployment were driven by effects on low-educated, non-managerial and short-tenured workers. Our estimates suggest that cuts in bank lending can account for at least 5% of the fall in employment of low-educated workers in our sample, and are an important factor behind heterogeneous employment dynamics in times of contractionary credit.
- JEL Code:
- E24,E44,G01,G21,J23
- 14 November 2024
-
Working Paper Series - Issue No. 3000Details
- Abstract:
- This paper documents the extension of the system-wide stress testing framework of the ECB with the insurance sector for a more thorough assessment of risks to financial stability. The special nature of insurers is captured by the modelling of the liability side and its loss absorbing capacity of technical provisions as the main novel feature of the model. Leveraging on highly granular data and information on bilateral exposures, we assess the impact of liquidity and solvency shocks and demonstrate how a combined endogenous reactions of banks, investment funds and insurance companies can further amplify losses in the financial system. The chosen hypothetical scenario and subsequent simulation results show that insurers’ ability to transfer losses to policyholders reduces losses for the entire financial sector. Furthermore, beyond a certain threshold, insurance companies play a crucial role in mitigating both direct and indirect contagion.
- JEL Code:
- D85,G01,G21,G23,L14
- 14 November 2024
-
The ECB BlogDetails
- JEL Code:
- E50,E58
- Subtitle:
- The Eurosystem has started to reduce its bond holdings. This ECB Blog post investigates how strongly the shrinking balance sheet affects long-term interest rates. Estimates based on the Survey of Monetary Analysts suggest: an expected €1 trillion reduction in bond holdings may raise long-term risk-free interest rates by about 35 bps.
- 13 November 2024
-
Occasional Paper Series - Issue No. 360Details
- Abstract:
- As digital payments become increasingly popular, many central banks are looking into the issuance of retail central bank digital currency (CBDC) as a new central bank monetary liability in addition to banknotes and commercial bank reserves. CBDC will have broadly the same balance sheet and profit implications as the issuance of banknotes. While the decision to issue CBDC is often thought to likely increase the size of central banks’ balance sheets, the net impact of digitalisation on balance sheet size could also be negative, as the number of banknotes in circulation may decline and CBDC’s design features could limit its take-up as a store of value. We use scenario analyses to illustrate the key drivers of the impact of CBDC on central bank profitability, with the part of CBDC that does not derive from an exchange of banknotes being an important factor. The financial risk implications of CBDC for central banks can be managed via well-established frameworks and relate primarily to the impact on balance sheet size and asset composition. The paper concludes with a discussion on how the profit and risk channels affect central bank capital.
- JEL Code:
- E58
- 12 November 2024
-
Weekly financial statementAnnexes
- 12 November 2024
-
Weekly financial statement - Commentary
- 12 November 2024
-
The ECB BlogDetails
- Subtitle:
- Complacency in fighting climate change and preserving biodiversity is endangering our economic survival. The longer we wait, the higher the costs will be. Christine Lagarde, President of the European Central Bank, warns of the growing gap between the commitments made and the investment needed.
- 8 November 2024
-
Working Paper Series - Issue No. 2999Details
- Abstract:
- In 1936, John Maynard Keynes proposed that emotions and instincts are pivotal in decision-making, particularly for investors. Both positive and negative moods can influence judgments and decisions, extending to economic and financial choices. Intuitions, emotional states, and biases significantly shape how people think and act. Measuring mood or sentiment is challenging, but surveys and data collection methods, such as confidence indices and consensus forecasts, offer some solutions. Recently, the availability of web data, including search engine queries and social media activity, has provided high-frequency sentiment measures. For example, the Italian National Statistical Institute’s Social Mood on Economy Index (SMEI) uses Twitter data to assess economic sentiment in Italy. The relationship between SMEI and financial market activity, specifically the FTSE MIB index and its volatility, is examined using a trivariate Vector Autoregressive model, taking into account the impact of the COVID-19 pandemic.
- JEL Code:
- C1,C32,C53,G4
- 8 November 2024
-
Working Paper Series - Issue No. 2998Details
- Abstract:
- During the COVID-19 pandemic, governments in the euro area sharply increased spending while the European Central Bank eased financing conditions. We use this episode to assess how such a concerted monetary-fiscal stimulus redistributes welfare between various age cohorts. Our assessment involves not only the income side of household balance sheets (mainly direct effects of transfers) but also the more obscure financing side that, to a substantial degree, occurred via indirect effects (with a prominent role of the inflation tax). Using a quantitative life-cycle model, and assuming that the deficit was partly unfunded by future taxes, we document that young households benefited from the stimulus, while middle-aged and older agents mainly paid the bill. Crucially, most welfare redistribution was due to indirect effects related to macroeconomic adjustment that resulted from the stimulus. As a consequence, even though all age cohorts received significant transfers, the welfare of some actually decreased.
- JEL Code:
- E31,E51,E52,H5,J11
- 8 November 2024
-
Digital Euro Preparation Phase - Scheme Rulebook Development Group documentsAnnexes
- 8 November 2024
-
Digital Euro Preparation Phase - Scheme Rulebook Development Group documents
- 8 November 2024
-
Digital Euro Preparation Phase - Scheme Rulebook Development Group documentsAnnexes
- 8 November 2024
-
Digital Euro Preparation Phase - Scheme Rulebook Development Group documents
- 8 November 2024
-
Digital Euro Preparation Phase - Scheme Rulebook Development Group documentsAnnexes
- 8 November 2024
-
Digital Euro Preparation Phase - Scheme Rulebook Development Group documents
- 8 November 2024
- 8 November 2024
- 8 November 2024
- 7 November 2024
-
SpeechDetails
- Subtitle:
- Slides by Philip Lane, Member of the Executive Board of the ECB, at the "Public Debt: Past Lessons, Future Challenges" conference organised by Bank of Greece in Athens, Greece
- 7 November 2024
-
Working Paper Series - Issue No. 2997Details
- Abstract:
- We examine how agglomeration economies have influenced labour earnings in France over forty years. First, we define cities dynamically to account for their changing footprints. Our findings show that aggregate wage growth is mainly driven by growth in larger cities, rather than smaller ones or by population shifts across cities. We estimate individual wages incorporating time-varying city and individual fixed effects, and analyse how city characteristics (employment density, area, and market access) and their returns impact wage evolution. Changes in the values of these characteristics have minimal effect, but changes in their returns significantly influence wages, with notable variation across cities. Overall, aggregate wage growth in France reflects larger returns to larger city size. Our model, that incorporate the impact of agglomeration economies on city size and population, suggests that changes in returns do not drive population or area changes sufficiently to impact aggregate labour earnings, supporting our empirical findings.
- JEL Code:
- R23,J31,J61
- 7 November 2024
-
Working Paper Series - Issue No. 2996Details
- Abstract:
- This paper investigates the interplay between discretionary fiscal policy and inflation in the euro area, emphasizing the role of public debt levels in modulating this relationship. It explores how fiscal expansions or contractions influence inflationary pressures, particularly under varying debt conditions. The analysis reveals that fiscal policy’s effect on inflation is non-linear, with debt levels significantly affecting the inflationary outcome of fiscal measures. High debt levels tend to amplify the inflation response to fiscal expansions, a finding that holds under multiple analytical frameworks and robustness checks. This paper contributes to the empirical literature by highlighting the critical role of fiscal policy, especially in high-debt environments, and its implications for inflation dynamics in the euro area.
- JEL Code:
- E31,E62,H63
- 7 November 2024
-
Survey on the Access to Finance of Enterprises in the euro areaAnnexes
- 7 November 2024
-
SAFE questionnaire
Related- 7 November 2024
- 7 November 2024
-
Press releaseRelated
- 7 November 2024
-
Survey on the Access to Finance of Enterprises in the euro area
- 7 November 2024
-
SpeechDetails
- Subtitle:
- Speech by Isabel Schnabel, Member of the Executive Board of the ECB, at the annual ECB Conference on Money Markets
Annexes- 7 November 2024
- 6 November 2024
-
SpeechDetails
- Subtitle:
- Speech by Luis de Guindos, Vice-President of the ECB, at the Distinguished Speakers Seminar organised by the European Economics and Financial Centre, University of London
- 6 November 2024
-
SpeechDetails
- Subtitle:
- Welcome address by Christine Lagarde, President of the ECB, at the tenth anniversary of the Single Supervisory Mechanism
- 5 November 2024
-
SpeechDetails
- Subtitle:
- Lecture by Ms Schnabel, Member of the Executive Board of the ECB, at Michael Chae Seminar on Macroeconomic Policy at Harvard University’s Department of Economics in Cambridge, MA, USA
- 5 November 2024
-
SpeechDetails
- Subtitle:
- Speech by Christine Lagarde, President of the ECB, at an event to mark the 15th anniversary of the Autorité de la concurrence
- 5 November 2024
-
Disaggregated financial statement
- 5 November 2024
-
Weekly financial statementAnnexes
- 5 November 2024
-
Weekly financial statement - Commentary
- 5 November 2024
-
Macroprudential Bulletin - FocusDetails
- Abstract:
- This special focus examines the size and characteristics of bank lending to real estate investment funds (REIFs) in the euro area. Overall, bank lending to REIFs is limited in size, with financial stability risks appearing to be contained as a result. However, stress in the REIF sector could still expose banks to losses and could be exacerbated by the riskier nature of this loan portfolio. Finally, high financial leverage in the REIF sector could also pose risks, however, further analysis is required to assess possible risks from pockets of highly leveraged REIFs.
- JEL Code:
- G21,G23,R33
- 5 November 2024
-
Macroprudential Bulletin - ArticleDetails
- Abstract:
- This article analyses the complex linkages between commercial real estate (CRE) markets and the financial system. Examining data from a wide range of sources this article presents the first system-wide mapping of CRE exposures in the euro area. The exercise identifies several sectors – real estate companies, real estate investment funds and real estate investment trusts – with particularly large CRE exposures. Structural vulnerabilities among these key players increase their exposure to CRE market shocks and the likelihood that they could amplify these shocks. In the case of real estate investment funds, highlighting the need to develop a comprehensive macroprudential framework to address liquidity vulnerabilities. Moreover, the complexity of CRE exposures that arise from extensive debt and equity linkages between these key owners of CRE and their financiers adds a further layer of risk, with the potential to exacerbate uncertainty and feedback loops. Findings underline the importance of closely monitoring links between CRE and the financial system and continuing work to close data gaps related to these markets.
- JEL Code:
- G21,G22,G23,G28,R33
- 4 November 2024
-
SpeechDetails
- Subtitle:
- Keynote speech by Frank Elderson, Member of the Executive Board of the ECB and Vice-Chair of the Supervisory Board of the ECB at the “10 Years of SSM – Looking back and looking forward” conference organised by the European Banking Institute and the Hessisches Ministerium für Wissenschaft und Kunst
- 4 November 2024
-
€STR Transparency on errors
- 1 November 2024
-
The ECB BlogDetails
- Subtitle:
- As they juggle various cards, apps and devices, most Europeans find that digital payments have fallen short of their promise to provide a convenient euro area-wide solution. The ECB’s Piero Cipollone explains how a digital euro would blend the simplicity of cash with digital convenience.
- 31 October 2024
- 31 October 2024
-
MFI interest rate statistics
- 31 October 2024
-
Economic Bulletin
- 31 October 2024
-
Economic Bulletin - BoxEconomic Bulletin Issue 7, 2024Details
- Abstract:
- This box analyses the revisions in policy rate path expectations observed in the Survey of Monetary Analysts (SMA) and identifies key drivers of these revisions. Amid the interest rate hikes of 2022 and 2023, financial markets and analysts made frequent and sizeable adjustments to their expectations for ECB policy rate levels. SMA participants’ macroeconomic expectations, particularly changes regarding headline inflation and GDP growth, played a significant role in shaping revisions to expectations for deposit facility rate (DFR) levels, especially during the surge in inflation. At the same time, financial market expectations, as reflected in forward rates, accounted for another sizeable share of revisions. Over time, the relative importance of macroeconomic expectations in driving expectations for the policy rate path diminished, with financial market expectations playing a dominant role by 2023.
- JEL Code:
- E52,E44,G12
- 31 October 2024
-
Economic Bulletin - BoxEconomic Bulletin Issue 7, 2024Details
- Abstract:
- This box presents newly released data on the activities of special-purpose entities (SPEs) in the external sector of the euro area. It shows that SPEs make a significant contribution to cross-border financial linkages. Overall, SPEs account for around a third of euro area foreign direct investment positions and more than 10% of total euro area cross-border financial linkages. Their importance varies substantially across countries. Although SPEs inflate the gross external positions of the euro area, their impact on the net international investment position is limited. The contribution made by SPEs in the euro area has declined recently from a high level amid national and global initiatives affecting the regulatory and taxation environments for multinational enterprises.
- JEL Code:
- C82,F23,F62
- 31 October 2024
-
Economic Bulletin - BoxEconomic Bulletin Issue 7, 2024Details
- Abstract:
- In recent years rising oil prices have often coincided with a strengthening of the US dollar. A positive correlation means that oil imports priced in local currencies become more expensive for oil importers such as the euro area, adding to inflation dynamics. Historically, there has been no systematic co-movement between oil prices and the US dollar. However, recent studies suggest that a positive correlation might have become the new normal since the United States became a significant oil exporter. The empirical models presented in this box show that the structural change in the US oil market has not been sufficient to render the correlation between oil prices and the US dollar systematically positive. Instead, the co-movement observed continues to be largely the result of specific shocks that steer both variables in the same direction rather than the reflection of a structural change in the link between oil prices and the US dollar.
- JEL Code:
- C22,E32,F31
- 31 October 2024
-
Economic Bulletin - BoxEconomic Bulletin Issue 7, 2024Details
- Abstract:
- Following a series of analyses on the accuracy of Eurosystem/ECB staff projections for inflation in recent years, this box shifts the focus to staff projections for growth. It shows that since 2022, the growth projections have been very reliable in the very short term but have tended to be too optimistic over one-year horizons. Private consumption and, to a lesser extent, investment, have tended to disappoint, due in part to monetary policy being tighter than initially assumed and uncertainty about its economic impact. However, once adjusted for errors in the conditioning assumptions of the projections, the projection errors are notably smaller, especially over the past year. Overall, despite the series of large shocks which hit the euro area economy in recent years, staff growth projection errors have been comparable with pre-pandemic averages.
- JEL Code:
- C53,E37
- 31 October 2024
-
InterviewDetails
- Subtitle:
- Interview with Christine Lagarde, President of the ECB, conducted by Eric Albert, Philippe Escande and Béatrice Madeline on 28 October 2024
- 30 October 2024
-
SpeechDetails
- Subtitle:
- Slides by Isabel Schnabel, Member of the Executive Board of the ECB, at the SAFE-CEPR conference on Euro@25 organised by Leibniz Institute SAFE in Frankfurt, Germany
- 30 October 2024
-
Economic Bulletin - BoxEconomic Bulletin Issue 7, 2024Details
- Abstract:
- This box provides an overview of fiscal developments in 2024 – as reflected in revisions in fiscal positions across rounds of Eurosystem and ECB staff macroeconomic projections. For the euro area as a whole and in groups of countries with both high and low debt ratios, the cyclically adjusted fiscal positions projected for 2024 have gradually weakened since the September 2023 projection round. Overall, fiscal positions remain weaker in the high-debt country group than in the low-debt group. Considerable risks continue to surround fiscal positions in the short run and beyond, with mixed signals regarding the 2024 outcome. For 2025, draft budgetary plans provide for some consolidation so as, among other reasons, to comply with the requirements of the revised EU economic governance framework.
- JEL Code:
- E62,H63
- 30 October 2024
-
Economic Bulletin - BoxEconomic Bulletin Issue 7, 2024Details
- Abstract:
- This box illustrates how aggregate greenfield foreign direct investment (FDI) flows are showing increasing signs of fragmentation along geopolitical fault lines. Euro area outward flows are following this trend, with greenfield investments increasingly tilted towards the United States and away from China. However, firms have also stepped up investment between geopolitical blocs to boost local production content in anticipation of protectionist measures or retaliatory tariffs. Econometric evidence from gravity models shows that the overall effect of increasing geopolitical divides on FDI is negative, with FDI flows within geopolitical blocs being almost three times higher than FDI flows between geopolitical blocs in recent quarters. Moreover, the estimates suggest that global FDI flows were dampened by 3% following the increases in average geopolitical distance owing to Russia’s invasion of Ukraine. Since then, geopolitical divides have become a particularly strong deterrent to greenfield FDI both into and out of the euro area.
- JEL Code:
- F13,F14,F21
- 30 October 2024
-
Research Bulletin - Issue No. 124Details
- Abstract:
- Is the burden of distress in the banking sector shared equally among households, or is it distributed unevenly? Following the global financial crisis, the economic consequences of severe disruptions to the banking sector and the unequal impact of recessions have become a key concern of macroeconomic policy. This article examines how temporary banking sector losses affect households differently according to their income levels. The analysis reveals that low-income households bear most of the burden, while high-income households tend to be less adversely affected. While a fewhigh-income individuals exposed to bank dividends may face severe losses, those who are able to quickly adjust their portfolios may be able to take advantage of low asset prices, earn high returns going forward, and overall benefit from distress in the financial sector.
- JEL Code:
- D31,E21,G01,G21
- 29 October 2024
-
Weekly financial statementAnnexes
- 29 October 2024
-
Weekly financial statement - Commentary
- 29 October 2024
-
Economic Bulletin - BoxEconomic Bulletin Issue 7, 2024Details
- Abstract:
- Consumer perceptions of the main drivers of inflation can affect their inflation expectations and, in turn, their economic behaviour. The results of the ECB’s Consumer Expectations Survey (CES) for March 2024 reveal that most euro area consumers attribute inflation primarily to input costs, followed by profits and wages. However, the proportion of consumers identifying wages as the main driver of inflation has increased since June 2023, with this perception being most pronounced in countries experiencing significant wage growth. These evolving perceptions highlight the need to monitor shifts in inflation narratives and their potential impact on inflation expectations.
- JEL Code:
- D11,D84,E31
- 29 October 2024
-
Economic Bulletin - ArticleEconomic Bulletin Issue 7, 2024Details
- Abstract:
- The Survey on the Access to Finance of Enterprises (SAFE) provides information on the financing needs of euro area firms, their economic performance, and the availability of external funding. The article illustrates the role that the SAFE has played over the past 15 years. First, it discusses the contribution of the survey to assessing the transmission of monetary policy decisions to firms’ access to finance and their financing conditions. Second, the article shows how SAFE-based data provide timely evidence of the impact of economic crises on firms’ performance. Third, the article documents the ability of SAFE-based indicators to track important shifts in the economic business cycle. Finally, the article discusses new survey modules that facilitate the analysis of the pricing and wage-setting behaviour of firms, along with their inflation expectations.
- JEL Code:
- C83,D22,E58,G32
- 29 October 2024
-
Working Paper Series - Issue No. 2995Details
- Abstract:
- This paper examines the asymmetry in global spillovers from Fed policy across tightening versus easing episodes several examples of which have been on display since the global financial crisis (GFC). We build a dynamic general equilibrium model featuring: (i) occasionally binding collateral constraints in the financial sector with significant cross-border exposure; and (ii) global supply chains, allowing us to match the asymmetry of spillovers across contractionary versus expansionary monetary policy shocks. We find clear asymmetries in the transmission of US monetary policy, with significantly larger spillovers during contractionary episodes under both conventional and unconventional monetary policy changes. Our results also reveal that the greater the size of international credit and supply chain networks and the policymakers’ aversion to exchange rate fluctuations in the rest of the world, the greater the spillover effects of US monetary policy shocks.
- JEL Code:
- E52,F41,E44
- 29 October 2024
-
Euro area economic and financial developments by institutional sector (full)
- 29 October 2024
-
InterviewDetails
- Subtitle:
- Interview with Luis de Guindos, Vice-President of the ECB, conducted by Domenico Conti
- 28 October 2024
-
SpeechDetails
- Subtitle:
- Contribution by Frank Elderson, Member of the Executive Board of the ECB and Vice-Chair of the Supervisory Board of the European Central Bank (ECB), 16th meeting of the Conference of the Parties to the Convention on Biological Diversity – Finance and Biodiversity Day
- 28 October 2024
-
SpeechDetails
- Subtitle:
- Introductory remarks by Luis de Guindos, Vice-President of the ECB, at a meeting with business group Hotusa
- 28 October 2024
-
Economic Bulletin - ArticleEconomic Bulletin Issue 7, 2024Details
- Abstract:
- The article examines how the ECB’s accountability practices have evolved during the ninth term of the European Parliament (2019-2024) and how these compare to previous parliamentary terms. It highlights innovations in the ECB’s accountability practices, including enhanced communication efforts and coverage of new initiatives, such as the digital euro project, which motivated extensive dialogue with the European Parliament. While focusing on central banking accountability in relation to monetary policy, it also outlines the accountability channels for ECB Banking Supervision. Overall, the article illustrates the fruitful joint efforts by the ECB and the European Parliament to effectively shape the accountability relationship and continue to enhance the dialogue between the two institutions.
- JEL Code:
- E52,E58
- 27 October 2024
-
Occasional Paper Series - Issue No. 359Details
- Abstract:
- Based on granular data at the product level, this paper looks at whether and how the euro area and the United States have modified their import sourcing strategies since 2016, the role played by geopolitical tensions and the potential impact on import prices. It considers two different, but not mutually exclusive, changes to sourcing strategies for a given product: (i) increasing the number of sourcing countries and (ii) reducing the import market share of the main supplier country. Data suggest that both regions have, on average, increased the number of sourcing countries, particularly for products that are mostly imported from “geopolitically distant” countries (based on UN General Assembly voting records). Broadening the number of supplier countries has come at a cost; however, it has affected only a small share of total imports, with modest implications for inflation and the terms of trade. At the same time, evidence of a reduction in the import share of the main supplier country is more mixed and is generally associated with a shift towards cheaper – but not necessarily geopolitically closer – countries, suggesting that cost considerations take precedence over supply chain resilience and national security concerns.
- JEL Code:
- F14,F51,F62
- 25 October 2024
-
SpeechDetails
- Subtitle:
- Statement by Christine Lagarde, President of the ECB, at the fiftieth meeting of the International Monetary and Financial Committee
- 25 October 2024
-
Monetary developments in the euro areaAnnexes
- 25 October 2024
- 24 October 2024
-
SpeechDetails
- Subtitle:
- Speech by Philip R. Lane, Member of the Executive Board of the ECB, at the Inflation: Drivers and Dynamics Conference 2024 organised by the Federal Reserve Bank of Cleveland and the ECB
- 24 October 2024
-
The ECB BlogDetails
- Subtitle:
- People have tended to be quite hesitant to trust banks abroad. That seems to be changing. The ECB Blog shows that cross-border bank deposits of private households have picked up recently.
- 23 October 2024
-
Occasional Paper Series - Issue No. 358Details
- Abstract:
- In recent years, monetary policy and inflation considerations have been playing an increasingly important role for macroprudential authorities in their policy setting. This paper aims to assess the implications of high inflation and rising interest rates for macroprudential policy stance. The conceptual discussions and model-based analyses included in this paper reflect on the appropriate direction and impact of macroprudential policies at the different stages of financial and business cycles, given cross-country and banking system heterogeneities. In this context, a key objective of the paper is to assess to what extent the interaction between macroprudential and monetary policies differs, given the heterogeneity across euro area countries exposed to a homogenous monetary policy. While both policies are to a large extent complementary, monetary policy may generate relevant spillovers due to its impact on the financial cycle and, potentially, on financial stability. The paper argues that the recent focus of macroprudential policy on resilience, when banking sector conditions ensure no unwarranted procyclical effects of macroprudential tightening, suggests an expansion of the notion of “complementarity” with monetary policy. Specifically, with the build-up of resilience, macroprudential policy acts de facto countercyclically, supporting monetary policy in its pursuit of price stability. In this regard, the paper stresses that the source of the inflationary shock (supply versus demand side) and the monetary environment primarily affect the intensity, speed and extent of buffer build-up or release within each stage of the financial cycle while affecting borrower-based measures in their bindingness.
- JEL Code:
- E52,G21,G28
- 23 October 2024
-
Working Paper Series - Issue No. 2994Details
- Abstract:
- We construct monetary policy indicators from high-frequency asset price changes following policy announcements, emphasising the concentration of asset price responses along specific dimensions and their leptokurtic distribution. Traditionally, these dimensions are identified by rotating principal components based on economic assumptions that overlook information in excess kurtosis. We employ Varimax rotation, leveraging excess kurtosis without using economic restrictions. Within a set of euro-area risk-free assets Varimax validates policy news along dimensions previously derived from structural identification approaches and rejects evidence of macroinformation shocks. Yet, once adding risky assets Varimax identifies only one risk-free factor in medium- to long-term yields and instead points to additional risk-shift factors.
- JEL Code:
- E43,E52,E58,C46,G14
- 23 October 2024
-
Research Bulletin - Issue No. 123Details
- Abstract:
- This article analyses how monetary policy shapes the aggregate and distributional effects of an energy price shock. Based on the observed heterogeneity in consumption exposures to energy and household wealth, we build a quantitative small open-economy Heterogeneous Agent New Keynesian (HANK) model that matches salient features of the euro area data. The model incorporates energy as both a consumption good for households with non-homothetic preferences as well as a factor input into production with input complementarities. Independently of policy, energy price shocks always reduce aggregate consumption. Households with little wealth are more adversely affected through both a decline in labour income as well as negative direct price effects. Active policy responses raising rates in response to inflation amplify aggregate outcomes through a reduction in aggregate demand, but speed up the recovery by enabling households to rebuild wealth through higher returns on savings. However, low-wealth households are also adversely affected by having less savings from which to rebuild wealth and instead lose out due to further declining labour income.
- JEL Code:
- E52,F41,Q43
- 23 October 2024
-
SpeechDetails
- Subtitle:
- Introductory remarks by Piero Cipollone, Member of the Executive Board of the ECB, at the Washington, DC Economic Festival
- 22 October 2024
-
SpeechDetails
- Subtitle:
- Slides by Philip R. Lane, Member of the Executive Board of the ECB, at seminar organised by Columbia University in New York, USA
- 22 October 2024
-
Weekly financial statementAnnexes
- 22 October 2024
-
Weekly financial statement - Commentary
- 22 October 2024
-
Working Paper Series - Issue No. 2993Details
- Abstract:
- The phenomenon of political populism and its financial determinants have proved elusive. We utilise the sudden and uneven change in credit conditions during the COVID-19 pandemic and the unprecedented government credit guarantee programme in France to investigate whether liquidity support to firms affects political preferences. Drawing on credit registry data – which provides the universe of loans and credit lines to firms – we build a postcode-municipality-level dataset and show that government-guaranteed credit reduced the support for the far right but increased it for the incumbent. The underlying economic channel shows that credit guarantees preserved employment, which in turn influenced political preferences. Effects are driven by microenterprises, predominantly self-employed businesses in which the employee-owner-voter is fully aware of the government financial support, i.e., where government support is more salient. This study does not aim to evaluate policies to address the popularity of populist politics.
- JEL Code:
- D72,E44,G18,G21,H81
- 21 October 2024
-
Occasional Paper Series - Issue No. 357Details
- Abstract:
- Understanding asymmetric risks in macroeconomic variables is challenging. Most structural models used for policy analysis are linearised and therefore cannot generate asymmetries such as those documented in the empirical growth-at-risk (GaR) literature. This report examines how structural models can incorporate non-linearities to generate tail risks. The first part reviews the various extensions to dynamic stochastic general equilibrium (DSGE) models and the computational challenges involved in accounting for risk distributions. This includes the use of occasionally binding constraints and more recent developments, such as deep learning, to solve non-linear versions of DSGEs. The second part shows how the New Keynesian DSGE model, augmented with the vulnerability channel as proposed by Adrian et al. (2020a, b), satisfactorily replicates key empirical facts from the GaR literature for the euro area. Furthermore, introducing a vulnerability channel into an open-economy set-up and a medium-sized DSGE highlights the importance of foreign financial shocks and financial frictions, respectively. Other non-linearities arising from financial frictions are also addressed, such as borrowing constraints that are conditional on an asset’s value, and the way macroprudential policies acting against those constraints can help stabilise the economy and generate positive spillovers to monetary policy. Finally, the report examines how other types of tail risk beyond financial frictions – such as the recent asymmetric supply-side shocks – can be incorporated into macroeconomic models used for policy analysis.
- JEL Code:
- E70,D50,G10,G12,E52
- 21 October 2024
-
Working Paper Series - Issue No. 2992Details
- Abstract:
- We study how disruptions to the supply of foreign critical inputs (FCIs) —that is, inputs primarily sourced from extra-EU countries with highly concentrated supply, advanced technology products, or which are key to the green transition —might affect value added at different levels of aggregation. Using firm-level customs and balance sheet data for Belgium, France, Italy, Slovenia and Spain, our framework allows us to assess how much geoeconomic fragmentation might affect European economies differently. Our baseline calibration suggests that a 50% reduction in imports of FCIs from China and other countries with similar geopolitical orientations would result in sizable losses of value added with significant heterogeneity across firms, sectors, regions and countries, driven by the heterogeneous exposure of firms. Our findings show that the short-term costs of supply disruptions of FCIs can be substantial, especially if firms cannot easily switch away from these inputs.
- JEL Code:
- F10,F14,F50,F60
- 21 October 2024
-
Working Paper Series - Issue No. 2991Details
- Abstract:
- We study the application of approximate mean field variational inference algorithms to Bayesian panel VAR models in which an exchangeable prior is placed on the dynamic parameters and the residuals follow either a Gaussian or a Student-t distribution. This reduces the estimation time of possibly several hours using conventional MCMC methods to less than a minute using variational inference algorithms. Next to considerable speed improvements, our results show that the approximations accurately capture the dynamic effects of macroeconomic shocks as well as overall parameter uncertainty. The application with Student-t residuals shows that it is computationally easy to include the COVID-19 observations in Bayesian panel VARs, thus offering a fast way to estimate such models.
- JEL Code:
- C18,C32,C33
- 21 October 2024
-
Survey of Monetary Analysts - Aggregate results
- 18 October 2024
- 18 October 2024
- 18 October 2024
-
Governing Council decisions - Other decisions
- 18 October 2024
-
Other publication
- 18 October 2024
-
Working Paper Series - Issue No. 2990Details
- Abstract:
- Firms’ perceived cost of green capital has decreased since the rise of sustainable investing. Green and brown firms perceived their cost of capital to be the same before 2016, but after the post-2016 surge in sustainable investing, green firms perceived their cost of capital to be on average 1 percentage point lower. This difference has widened as sustainable investing has intensified. Within some of the largest energy and utility firms, managers have started applying a lower cost of capital to greener divisions. The changes in the perceived cost of green capital incentivize cross-firm and within-firm reallocation of capital toward greener investments.
- JEL Code:
- G10,G12,G31,G32,G41,Q54
- Network:
- ECB Lamfalussy Fellowship Programme
- 18 October 2024
-
Working Paper Series - Issue No. 2989Details
- Abstract:
- This paper analyses how country-specific institutional quality shapes the impact of monetary policy on downside risks to GDP growth in the euro area. Using identified high-frequency shocks in a growth-at-risk framework, we show that monetary policy has a higher impact on downside risks in the short term than in the medium term. However, this result for the euro area average hides significant heterogeneity across countries. In economies with weak institutional quality, medium-term growth risks increase substantially following contractionary monetary policy shocks. In contrast, these risks remain relatively stable in countries with high institutional quality. This suggests that improvements in institutional quality could significantly enhance euro area countries’ economic resilience and support the smooth transmission of monetary policy.
- JEL Code:
- C23,E52,F45,G28,O43
- 18 October 2024
-
Balance of payments (monthly)Annexes
- 18 October 2024
- 18 October 2024
-
Press releaseRelated
- 18 October 2024
-
Survey of Professional Forecasters
- 18 October 2024
-
Survey of Professional ForecastersAnnexes
- 18 October 2024
- 18 October 2024
-
Economic Bulletin - BoxEconomic Bulletin Issue 7, 2024Details
- Abstract:
- This box summarises the findings of recent contacts between ECB staff and representatives of 95 leading non-financial companies operating in the euro area. According to these exchanges, which took place between 16 and 26 September 2024, business momentum slowed somewhat over the summer, mainly as a result of declining confidence in the industrial sector, causing firms to scale back investment and focus on cost cutting. Meanwhile, the anticipated recovery in consumer spending was still rather patchy. Price growth moderated further overall, mainly on account of some easing in services prices. Wage growth was expected to slow further next year, while still compensating to some extent for past inflation.
- JEL Code:
- E2,E3,L2
- 18 October 2024
-
Survey on credit terms and conditions in euro-denominated securities financing and OTC derivatives marketsAnnexes
- 18 October 2024
- 18 October 2024
-
Press releaseRelated
- 18 October 2024
- 17 October 2024
- 17 October 2024
-
Combined monetary policy decisions and statementRelated
- 17 October 2024
-
Monetary policy statement
- 17 October 2024
-
Monetary policy statementDetails
- Subtitle:
- Christine Lagarde, President of the ECB, Luis de Guindos, Vice-President of the ECB, Ljubljana, 17 October 2024
Related- 17 October 2024
-
Combined monetary policy decisions and statement
- 17 October 2024
-
Monetary policy decisionRelated
- 14 November 2024
-
Monetary policy account
- 17 October 2024
-
Combined monetary policy decisions and statement
- 17 October 2024
-
Monetary policy statement
- 16 October 2024
-
SpeechDetails
- Subtitle:
- Speech by Christine Lagarde, President of the ECB, at the official dinner of Banka Slovenije in Ljubljana, Slovenia
- 15 October 2024
-
Digital Euro Preparation Phase document
- 15 October 2024
- 15 October 2024
- 15 October 2024
- 15 October 2024
- 15 October 2024
- 15 October 2024
-
Weekly financial statementAnnexes
- 15 October 2024
-
Weekly financial statement - Commentary
- 15 October 2024
-
Euro area bank lending surveyAnnexes
- 15 October 2024
-
Euro area bank lending survey - Annex
Related- 15 October 2024
-
Press release
- 15 October 2024
-
Press releaseRelated
- 15 October 2024
-
Euro area bank lending survey
- 10 October 2024
-
Monetary policy accountRelated
- 12 September 2024
-
Monetary policy decision
- 9 October 2024
-
Weekly financial statementAnnexes
- 9 October 2024
-
Weekly financial statement - Commentary
- 9 October 2024
-
The ECB BlogDetails
- JEL Code:
- E50,F13,F43
- Subtitle:
- China has been an important and reliable supplier of critical inputs for European industries for decades. But how vulnerable would our companies be if that suddenly stopped? The ECB Blog estimates the potential losses in value added for manufacturers in five countries.
- 8 October 2024
-
Discussion Paper Series - Issue No. 26Details
- Abstract:
- The change in macroeconomic conditions since the ECB’s strategy review in 2021 towards an environment characterised by above-target inflation, high interest rates, and renewed concerns about elevated government debt has been a vocal reminder of the intricate interdependencies between monetary and fiscal policies. Against this background, our paper reviews the literature on how central banks’ ability to maintain price stability is shaped by their interactions with fiscal policy and the state of the economy. According to standard models, a policy framework aimed at price stability requires suitable commitments from both monetary and fiscal authorities. When public debt burdens become too high, price stability may be at risk. The paper also draws lessons on how to mitigate such risks.
- JEL Code:
- E31,E52,E58,E62,E63,F45
- 8 October 2024
-
InterviewDetails
- Subtitle:
- Interview with Frank Elderson, Member of the Executive Board of the ECB and Vice-Chair of the Supervisory Board of the ECB, conducted by Miha Jenko
- 7 October 2024
-
Digital Euro Preparation Phase document
- 7 October 2024
-
Working Paper Series - Issue No. 2988Details
- Abstract:
- The results of this paper provide empirical evidence that regulatory capital ratios drive bank Credit Default Swaps (CDS) and that markets react more to changes in capital requirements if implemented via direct adjustments to Pillar 1 risk weights than imposed as a percentage of Risk-Weighted Assets (RWAs) under Pillar 2. In other words, market discipline on bank capital adequacy is sensitive to the composition of the capital requirement stack. Therefore, this paper contributes novel insights to existing research on the market relevance of regulatory capital ratios, on the functioning of the Basel framework, and on market discipline along with its relationship with Pillar 1 and Pillar 2 capital requirements. The findings are relevant in light of the continuous discussions around the capital regulation for Interest Rate Risk in the Banking Book (IRRBB) and other Pillar 2 risks because they suggest that risks are more disciplined by markets if they are reflected in regulatory capital ratios via RWAs. Moreover, the results suggest that further regulatory alignment within the EU can impact the comparability of regulatory capital ratios and affect pricing decisions. In the first empirical step, the research investigates the drivers of CDS and identifies a significant relationship between CDS spreads and regulatory capital ratios. In the second step, the paper researches a quasi-natural experiment based on an event in the EU banking sector. In 2018, the Swedish supervisory authority changed the implementation approach of a risk weight floor on Swedish mortgages by shifting it from Pillar 2 to Pillar 1 while keeping total capital requirements stable. To assess if this merely technical regulatory adjustment triggered an unexpected reaction by markets, a two-step system Generalised Method of Moments (GMM) regression is applied to a sample of CDS spreads of 21 European banks between 2014 and 2020.
- JEL Code:
- F36,G12,G21,G28
- 7 October 2024
-
Working Paper Series - Issue No. 2987Details
- Abstract:
- Using a new series of crypto shocks, we document that money market funds’ (MMF) assets under management, and traditional financial market variables more broadly, do not react to crypto shocks, whereas stablecoin market capitalization does. U.S. monetary policy shocks, in contrast, drive developments in both crypto and traditional markets. Crucially, the reaction of MMF assets and stablecoin market capitalization to monetary policy shocks is different: while prime-MMF assets rise after a monetary policy tightening, stablecoin market capitalization declines. In assessing the state of the stablecoin market, the risk-taking environment as dictated by monetary policy is much more consequential than flight-to-quality dynamics observed within stablecoins and MMFs.
- JEL Code:
- E50,F30
- 7 October 2024
-
SpeechDetails
- Subtitle:
- Slides by Philip R. Lane, Member of the Executive Board of the ECB, at the ECB Conference on Monetary Policy 2024: bridging science and practice
- 7 October 2024
-
SpeechDetails
- Subtitle:
- Keynote speech by Piero Cipollone, Member of the Executive Board of the ECB, at the Bundesbank Symposium on the Future of Payments
- 4 October 2024
-
SpeechDetails
- Subtitle:
- Keynote speech by Frank Elderson, Member of the Executive Board of the ECB and Vice-Chair of the Supervisory Board of the ECB, at the Sustainable Finance Lab Symposium on Finance in Transition
- 4 October 2024
-
Euro area economic and financial developments by institutional sector (early)
- 4 October 2024
-
Balance of payments (quarterly)
- 3 October 2024
-
The ECB BlogDetails
- JEL Code:
- E52,E49
- Subtitle:
- Monetary policy decisions have direct financial consequences for many consumers, especially as they influence mortgage conditions. The ECB Blog looks at how these effects differ based on consumers’ mortgage situations and why that matters for the transmission of monetary policy.
- 2 October 2024
-
SpeechDetails
- Subtitle:
- Speech by Isabel Schnabel, Member of the Executive Board of the ECB, at the Walter Eucken Lecture 2024 at University of Freiburg, Germany
Annexes- 2 October 2024
-
SpeechDetails
- Subtitle:
- Speech by Isabel Schnabel, Member of the Executive Board of the ECB, at the Walter Eucken Lecture 2024 at University of Freiburg, Germany
- 2 October 2024
-
Digital Euro Preparation Phase documentAnnexes
- 2 October 2024
-
Digital Euro Preparation Phase document
- 2 October 2024
-
Digital Euro Preparation Phase document
- 2 October 2024
-
SpeechDetails
- Subtitle:
- Slides by Philip R. Lane, Member of the Executive Board of the ECB, at at the 5th joint ECB, Bank of Canada and Federal Reserve Bank of New York Conference on expectations surveys, central banks and the economy
- 2 October 2024
-
Working Paper Series - Issue No. 2986Details
- Abstract:
- We use inflation and income growth expectations from the ECB Consumer Expectations Survey to measure the subjective expected pass-through of inflation to income in the main euro area countries. By aggregating consumers’ responses to probabilistic questions, we obtain significantly higher estimates of the pass-through than those obtained from micro data. Our methodology allows one to examine how the pass-through varies along the probability distribution of expected inflation, which turns out to be particularly large for moderate inflation expectations. We find significant heterogeneity in the inflation pass-through across countries, ages and income groups, consistent with different wage and pension indexation regimes.
- JEL Code:
- C10,C22,E31,E66
- 2 October 2024
-
MFI interest rate statistics
- 2 October 2024
-
SpeechDetails
- Subtitle:
- Keynote speech by Luis de Guindos, Vice-President of the ECB, at the Latvijas Banka and SUERF Economic Conference 2024
- 1 October 2024
-
Disaggregated financial statement
- 1 October 2024
-
Weekly financial statementAnnexes
- 1 October 2024
-
Weekly financial statement - Commentary
- 1 October 2024
-
Working Paper Series - Issue No. 2985Details
- Abstract:
- This paper examines the impact of rising interest rates on central bank profitability. Using a stylized income model, we demonstrate that changes in interest rates in combination with expansive balance sheet policies introduce a cyclical component into the central bank’s profit and loss statement. Ourfindings reveal, however, that while the interplay of such policies may dampen short-term profitability if interest rates rise, they do not undermine a central bank’s financial strength, because higher interest rates also raise the value of future seigniorage income. Using data for the euro area, we quantify the consequences for inflation of setting interest rates aimed at mitigating financial losses, showing that such a strategy would lead to substantially higher inflation rates. Overall, our findings confirm that a central bank’s willingness to accept temporary losses reflects a commitment to price stability, rather than a hindrance.
- JEL Code:
- E31,E43,E52,E58,E63
- 1 October 2024
-
Working Paper Series - Issue No. 2984Details
- Abstract:
- We explore the increasing divergence between economic growth and energy consumption through energy-saving technical progress. Proposing a new measure of energy-saving technology, we study the underlying drivers in a semi-structural model of the U.S. economy. Our analysis shows that energy price shocks reduce consumption and stimulate energy-saving innovation, but also cause economic downturns and crowd out other innovations. Only energy-saving technology shocks can explain the negative co-movement between output and energy use. These sudden efficiency gains emerge as the primary driver of energy-saving technical change. Our findings highlight the importance of fostering energy-saving innovations in transitioning to a low-carbon economy.
- JEL Code:
- E0,O30,Q32,Q43,Q55
- Network:
- ECB Lamfalussy Fellowship Programme
- 1 October 2024
-
SpeechDetails
- Subtitle:
- Welcome address by Luis de Guindos, Vice-President of the ECB, at the 5th joint ECB, Bank of Canada and Federal Reserve Bank of New York Conference on expectations surveys, central banks and the economy
Related- 29 September 2024
- 30 September 2024
-
SpeechDetails
- Subtitle:
- Speech by Christine Lagarde, President of the ECB, at the Hearing of the Committee on Economic and Monetary Affairs of the European Parliament
Annexes- 30 September 2024
- 30 September 2024
-
Speech
- 30 September 2024
-
Survey of Monetary Analysts
- 27 September 2024
- 27 September 2024
-
Governing Council decisions - Other decisions
- 27 September 2024
-
SpeechDetails
- Subtitle:
- Keynote speech by Piero Cipollone, Member of the Executive Board of the ECB, at the Economics of Payments XIII Conference organised by the Oesterreichische Nationalbank
- 27 September 2024
-
Press release
- 26 September 2024
-
SpeechDetails
- Subtitle:
- Slides by Isabel Schnabel, Member of the Executive Board of the ECB, at the Wirtschaftsrat der CDU in Stuttgart, Germany
- 26 September 2024
-
SpeechDetails
- Subtitle:
- Welcome address by Christine Lagarde, President of the ECB and Chair of the European Systemic Risk Board, at the eighth annual conference of the ESRB
- 26 September 2024
-
Economic Bulletin
- 26 September 2024
-
Monetary developments in the euro areaAnnexes
- 26 September 2024
-
Monetary developments in the euro area
- 26 September 2024
-
Economic Bulletin - BoxEconomic Bulletin Issue 6, 2024Details
- Abstract:
- The increase in policy rates has translated into higher interest rates on deposits in both the euro area and the United States, albeit more so in the euro area despite a smaller increase in the policy rate and a lower starting point. As in previous hiking cycles, the increase in remuneration has been considerably smaller for overnight deposits than for other assets, triggering a rebalancing of money holders’ portfolios in both economies. As policy rates increased, credit to firms and households fell more sharply in the euro area than in the United States. The pass-through to lending rates was rather similar. Yet, the greater prevalence of fixed rate mortgages in the United States entailed a slower transmission to rates on existing mortgages. The developments in deposits and loans were mirrored in broad money growth, with high US deposit volumes reflecting the much larger pandemic-related asset purchases by the Fed, and with the moderation in lending volumes having been the main driver of the weakening in monetary dynamics in the euro area, whereas in the US, other sources were the initial drivers, with bank lending only contributing later.
- JEL Code:
- E40,E41,E43,E44,E51,E52,E58,G11
- 26 September 2024
-
Economic Bulletin - BoxEconomic Bulletin Issue 6, 2024Details
- Abstract:
- This box describes liquidity conditions and the Eurosystem monetary policy operations during the third and fourth reserve maintenance periods of 2024, from 17 April to 23 July 2024.
- JEL Code:
- E40,E52,E58
- 26 September 2024
-
Economic Bulletin - BoxEconomic Bulletin Issue 6, 2024Details
- Abstract:
- Consumer confidence in the euro area plummeted when Russia launched its full-scale invasion of Ukraine and has remained at a low level since then, despite some recovery. This box analyses the underlying factors that explain this subdued consumer confidence and assesses the implications of persistently low confidence for private consumption going forward. It finds that rising inflation was the initial cause of the decline in consumer confidence compared with the pre-invasion period, followed later by the increasingly negative effects of higher borrowing costs coupled with declining house prices. Moreover, the fact that consumer confidence is still subdued suggests that private consumption will only improve moderately in the short term.
- JEL Code:
- E21,E27,E29
- 25 September 2024
-
The ECB BlogDetails
- Subtitle:
- The job of central banks is to help the economy navigate shocks and steer inflation back to target. This ECB Blog post asks what we can learn from past monetary policy cycles about how to control inflation while achieving a soft landing of the economy.
- 25 September 2024
-
Economic Bulletin - BoxEconomic Bulletin Issue 6, 2024Details
- Abstract:
- Wage indicators give policymakers a key perspective on the outlook for inflation through the effect of wages on the price-setting of firms and on the consumption behaviour of households. This box studies recent developments in wage indicators, with a particular focus on wage drift, which has recently been in decline. The moderation of wage drift is key to explaining the easing of growth in compensation per employee. This is due to negotiated wage growth taking over the role of achieving inflation compensation from wage drift. The recovery of average hours worked after the pandemic had also been pushing the wage drift up, but this impact has weakened recently.
- JEL Code:
- E24,J30,J52
- 25 September 2024
-
Economic Bulletin - BoxEconomic Bulletin Issue 6, 2024Details
- Abstract:
- This box summarises the findings from an ECB survey in which leading firms were asked about key labour market trends. The responses suggest that recruiting new employees has become more difficult in recent years, owing particularly to labour shortages, and that this is the main motivation for firms to hoard labour during downturns. Reduced working hours are said to reflect the preferences of employees more than of firms. The increase in remote working has helped to expand the potential pool of job candidates and reduced the cost of office space but is also perceived by some firms to have reduced productivity. The survey also asked about the adoption of generative artificial intelligence (generative AI). Responses point to a significant take-up of generative AI over the past 18 months, motivated in particular by the wish to increase employee access to information.
- JEL Code:
- E2,E3,L2
- 24 September 2024
-
Weekly financial statementAnnexes
- 24 September 2024
-
Weekly financial statement - Commentary
- 24 September 2024
-
Economic Bulletin - BoxEconomic Bulletin Issue 6, 2024Details
- Abstract:
- The role of nature in economic activity is insufficiently incorporated in economic statistics. While economic growth in Europe in recent decades has been lower than in some other regions, it has been achieved alongside a reduction in pollution, and once these benefits have been accounted for, this growth appears more favourable. In 2019 the estimated value of ecosystem services in the EU amounted to over €234 billion. However, understanding how nature loss may affect future output requires more than just calculating the monetary value of ecosystem services,it is crucial to develop and monitor statistical measures that explicitly capture the evolution of nature.
- JEL Code:
- D24,E01,Q57
- 24 September 2024
-
Economic Bulletin - ArticleEconomic Bulletin Issue 6, 2024Details
- Abstract:
- Nature is crucial to human wellbeing and provides essential ecosystem services that support economic activity. However, the economic value of these services is often undervalued because they are not traded in markets or given a direct monetary value. Nature degradation, including biodiversity loss, threatens the continued provision of these critical services, potentially leading to significant macroeconomic consequences that affect price and financial stability. Recent analysis by the European Central Bank (ECB) revealed that nearly three-quarters of the euro area economy and financial system are critically dependent on healthy ecosystems. Therefore, a systematic, proactive and comprehensive approach to quantifying and assessing the impact of escalating nature-related economic and financial risks on price and financial stability is essential. This article discusses the implications from a central banking perspective, emphasising the importance of an integrated approach to climate change and nature-related risks. It further explores the impact of these risks on our economy and seeks a deeper understanding of the physical impacts of climate change.
- JEL Code:
- C80,C60,G21,Q20,Q50
- 24 September 2024
-
Working Paper Series - Issue No. 2983Details
- Abstract:
- This paper introduces a Bayesian Quantile Factor Augmented VAR (BQFAVAR) to examine the asymmetric effects of monetary policy throughout the business cycle. Monte Carlo experiments demonstrate that the model effectively captures non-linearities in impulse responses. Analysis of aggregate responses to a contractionary monetary policy shock reveals that financial variables and industrial production exhibit more pronounced impacts during recessions compared to expansions, aligning with predictions from the ’financial accelerator’ propagation mechanism literature. Additionally, inflation displays a higher level of symmetry across economic conditions, consistent with households’ loss aversion in the context of reference-dependent preferences and central banks’ commitment to maintaining price stability. The examination of price rigidities at a granular level, employing sectoral prices and quantities, demonstrates that during recessions, the contractionary policy shock results in a more pronounced negative impact on quantities compared to expansions. This finding provides support for the notion of stronger downward than upward price rigidity, as suggested by ’menu-costs models’.
- JEL Code:
- C11,C32,E32,E37,E52
- 24 September 2024
-
The ECB BlogDetails
- JEL Code:
- H63,G12,G24
- Subtitle:
- Hedge funds have substantially increased their trading activity in euro area government bond and repo markets. The ECB Blog evaluates how this plays out for market functioning and intermediation.
- 23 September 2024
-
SpeechDetails
- Subtitle:
- Introductory statement by Piero Cipollone, Member of the Executive Board of the ECB, at the Committee on Economic and Monetary Affairs of the European Parliament
- 23 September 2024
-
Economic Bulletin - BoxEconomic Bulletin Issue 6, 2024Details
- Abstract:
- Labour productivity growth in the euro area remains significantly below its pre-pandemic levels, whereas in the United States it is largely in line with the pre-pandemic trend. The slower growth in euro area labour productivity has been broadly based across sectors. This discrepancy in productivity growth between the two regions partly stems from the higher procyclicality of labour productivity in the euro area. However, structural factors are also likely to play a significant role in explaining productivity differences between the two regions and are rooted in weak contributions from capital accumulation and innovation in the euro area. These factors have arguably been present since well before the pandemic.
- JEL Code:
- E24,E32,E60
- 23 September 2024
-
Economic Bulletin - ArticleEconomic Bulletin Issue 6, 2024Details
- Abstract:
- Over the past few decades, the euro area has gradually lost market share in global trade. This article describes the long-term trends underlying the decline in the euro area’s market share, relating it to losses in competitiveness in foreign markets. It explains how a series of recent global shocks – such as pandemic-related supply disruptions, geopolitical tensions and the energy shock following Russia’s invasion of Ukraine – as well as other factors affecting price and non-price competitiveness had an asymmetric impact on the euro area compared with its main trading partners and exposed important vulnerabilities in its external competitiveness. These vulnerabilities are particularly significant in view of the challenges ahead, which are linked to the persistence of the energy shock, risks associated with geo-economic fragmentation and the ongoing structural transformation of the European and global economies.
- JEL Code:
- F14
- 20 September 2024
-
SpeechDetails
- Subtitle:
- Speech by Christine Lagarde, President of the ECB, at the 2024 Michel Camdessus Central Banking Lecture organised by the IMF
- 20 September 2024
-
InterviewDetails
- Subtitle:
- Interview with Luis de Guindos, Vice-President of the ECB, conducted by Gonçalo Almeida on 13 September
- 19 September 2024
-
SpeechDetails
- Subtitle:
- Slides by Isabel Schnabel, Member of the Executive Board of the ECB, in an exchange of views on "Current aspects of monetary policy" with the Association of German Banks (Committee for Economic and Monetary Policy) in Frankfurt, Germany
- 19 September 2024
-
Balance of payments (monthly)Annexes
- 19 September 2024
-
Balance of payments (monthly)
- 18 September 2024
-
Use of cash by companies in the euro areaAnnexes
- 24 September 2024
-
Use of cash by companies in the euro area
- 18 September 2024
-
Research Bulletin - Issue No. 122Details
- Abstract:
- What factors could drive transactional demand for central bank digital currency (CBDC)? We analyse payment survey data to arrive at a framework for understanding the role of adoption frictions and design strategies in shaping CBDC demand. The results of our analysis show that, while consumers may initially prefer to use more traditional payment methods, a design tailored to their specific needs could significantly increase CBDC uptake. Raising awareness and capitalising on network effects could also boost demand for CBDC.
- JEL Code:
- E41,G32
- 17 September 2024
-
Weekly financial statementAnnexes
- 17 September 2024
-
Weekly financial statement - Commentary
- 17 September 2024
-
The ECB BlogDetails
- Subtitle:
- Energy-intensive firms continue to suffer from low profits margins even as energy prices have fallen from their peak. The ECB Blog discusses implications for the green transition in the EU.
- 16 September 2024
-
SpeechDetails
- Subtitle:
- Keynote speech by Philip R. Lane, Member of the Executive Board of the ECB, at the European Investment Bank Chief Economists’ Meeting
Annexes- 16 September 2024
-
Speech
- 16 September 2024
-
Working Paper Series - Issue No. 2982Details
- Abstract:
- This paper presents an event-study methodology that combines market data and survey-based probabilities to infer the full effect of a policy decision, as seen through the lens of financial markets. The market reaction to an event’s outcome reflects its surprise or announcement effect, and generally not its full effect. However, under certain conditions, the unobserved full effect can be derived from the observed surprise effect. Most importantly, the ex-ante probabilities of different outcomes must be known. We apply this methodology to a real-world example: the European Central Bank’s announcement of its third series of targeted longer-term refinancing operations (TLTROIII). The introduction of TLTROIII was highly anticipated, and therefore partially priced in, as market participants feared a “cliff effect” with the preceding operations under TLTROII coming due. We estimate the announcement’s full effect, focusing on its impact on a set of asset prices, as compared to a baseline wherein TLTROIII would not have been introduced. The full market impact surpasses the surprise effect by a factor of fifteen. We also find that the announcement had a highly heterogeneous impact on euro area sovereign bond yields.
- JEL Code:
- G12,G13,G14
- 16 September 2024
-
Survey of Monetary Analysts - Aggregate results
- 15 September 2024
-
Occasional Paper Series - Issue No. 356Details
- Abstract:
- This study assesses euro area banks’ profitability using granular stress test data from three EU-wide exercises, coordinated by the European Banking Authority, that took place in 2016, 2018, and 2021. We propose a credit portfolio-level risk-adjusted return on assets for the euro area as a whole and for individual countries to assess the profitability of lending activities among euro area banks. Using banks’ own projections under the adverse scenarios of the stress test exercises for a consistent sample of euro area banks, we aim to uncover the effect of severe macroeconomic and financial conditions on the profitability of the various portfolios. We investigate how many country portfolios switch from profitable to loss-making under adverse conditions and show that this number peaks in the 2018 stress test exercise, while the 2021 exercise yields the lowest overall profitability. Overall, around 30% of exposures become unprofitable under stress conditions across the latest two exercises (compared to 20% for the 2016 exercise), mostly concentrated in the non-financial corporations (NFC) segment and, to a lesser extent, in the financial and mortgage portfolios. We also show in a regression analysis that the yield curve is an important determinant of portfolio-level profitability in a stress test setting, while the unemployment rate seems to be relevant in determining portfolio switches and GDP growth seems to influence the change in profitability. The results also point to some portfolio heterogeneity.
- 13 September 2024
-
Working Paper Series - Issue No. 2981Details
- Abstract:
- Financial losses can have persistent effects on the financial system. This paper proposes an empirical measure for the duration of these effects, Spillover Persistence. I document that Spillover Persistence is strongly correlated with financial conditions; during banking crises, Spillover Persistence is higher, whereas in the run-up phase of stock market bubbles it is lower. Lower Spillover Persistence also associates with a more fragile system, e.g., a higher probability of future crises, consistent with the volatility paradox. The results emphasize the dynamics of loss spillovers as an important dimension of systemic risk and financial constraints as a key determinant of persistence.
- JEL Code:
- E44,G01,G12,G20,G32
- 13 September 2024
-
Working Paper Series - Issue No. 2980Details
- Abstract:
- By applying a structural demand model to unique consumer-level survey data from the euro area, we assess how different CBDC design options, combined with individual (revealed) preferences, influence the potential demand for a digital euro. Estimating the demand for a digital euro, we find that if it were unconstrained, it could range, in steady state, between 3-28% of household liquid assets or €0.12 - €1.11 trillion, depending on whether consumers would perceive the digital euro to be more cash-like or deposit-like. With an illustrative €3,000 holding limit per person, it could instead range between 2-9% or €0.10 -€0.38 trillion. Privacy, automatic funding, and instant settlement raise its potential demand.
- JEL Code:
- E41,E50,E58
- 12 September 2024
- 12 September 2024
-
Macroeconomic projections for the euro areaAnnexes
- 12 September 2024
- 12 September 2024
-
Monetary policy statementDetails
- Subtitle:
- Christine Lagarde, President of the ECB, Luis de Guindos, Vice-President of the ECB, Frankfurt am Main, 12 September 2024
Related- 12 September 2024
-
Combined monetary policy decisions and statement
- 12 September 2024
-
Monetary policy decision
- 12 September 2024
-
Combined monetary policy decisions and statementRelated
- 12 September 2024
-
Monetary policy statement
- 12 September 2024
-
Monetary policy decisionRelated
- 12 September 2024
-
Combined monetary policy decisions and statement
- 12 September 2024
-
Monetary policy statement
- 10 September 2024
-
Weekly financial statementAnnexes
- 10 September 2024
-
Weekly financial statement - Commentary
- 6 September 2024
-
SpeechDetails
- Subtitle:
- Keynote speech by Frank Elderson, Member of the Executive Board of the ECB and Vice-Chair of the Supervisory Board of the ECB, at the ESCB Legal Conference 2024
- 5 September 2024
-
Letters to MEPsRelated
- 5 September 2024
-
Digital Euro Preparation Phase - Scheme Rulebook Development Group documents
- 5 September 2024
-
Digital Euro Preparation Phase - Scheme Rulebook Development Group documentsRelated
- 5 September 2024
- 5 September 2024
- 4 September 2024
-
InterviewDetails
- Subtitle:
- Interview with Piero Cipollone, Member of the Executive Board of the ECB, conducted by Eric Albert
- 3 September 2024
-
Disaggregated financial statement
- 3 September 2024
-
Weekly financial statementAnnexes
- 3 September 2024
-
Weekly financial statement - Commentary
- 3 September 2024
- 3 September 2024
-
MFI interest rate statistics
- 3 September 2024
-
The ECB BlogDetails
- JEL Code:
- F13,H25
- Subtitle:
- Euro area exporters are facing tougher competition from China. But why is that? The ECB Blog looks at the important role played by price competitiveness and the ongoing industrial upgrades being made in China.
- 30 August 2024
-
SpeechDetails
- Subtitle:
- Lecture by Isabel Schnabel, Member of the Executive Board of the ECB, at the Ragnar Nurkse Lecture Series organised by Eesti Pank in Tallinn, Estonia
Annexes- 30 August 2024
- 29 August 2024
-
Occasional Paper Series - Issue No. 355Details
- Abstract:
- The Eurosystem implements its monetary policy through a set of monetary policy instruments (MPIs). The period covered by this report (2022-23) was dominated by high inflation, which led to a change from an easing to a tightening monetary policy environment in line with the mandate of the European Central Bank (ECB) to pursue price stability. This report focuses on the accompanying shift in the use of MPIs. Key ECB interest rates were hiked to an unprecedented extent and at exceptional speed, leading to an exit from negative interest rates. This was accompanied by a gradual phasing-out of reinvestments under the asset purchase programmes, revisions to the conditions of targeted longer-term refinancing operations (TLTROs) and their subsequent substantial early repayments, and a phasing-out of pandemic collateral easing measures. This report discusses these developments and provides a full overview of the Eurosystem’s monetary policy implementation from 2022-23.
- JEL Code:
- D02,E43,E58,E65,G01
- 29 August 2024
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SpeechDetails
- Subtitle:
- Slides by Philip R. Lane, Member of the Executive Board of the ECB, at annual Central Bank Research Association meeting in Frankfurt, Germany
- 29 August 2024
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Working Paper Series - Issue No. 2979Details
- Abstract:
- We examine the issue of the appropriate selection of macroprudential instruments according to the vulnerabilities identified and the policymakers’ objectives using a version of the 3D DSGE model following Mendicino et al. (2020) and Hinterschweiger et al. (2021) calibrated for the euro area. We consider a broad set of macroprudential instruments, including broad and sectoral countercyclical capital requirements, LTV and LTI limits and assess their transmission channels as well as their effectiveness in mitigating rising broad and sectoral vulnerabilities. We find that sectoral instruments are most effective to increase bank resilience to sectoral risks, limiting spillover effects. LTI limits are superior to LTV limits in containing the growth of mortgage credit and household indebtedness. Finally, we find that macroprudential policy is better suited than monetary policy to address emerging real estate-related imbalances.
- JEL Code:
- E44,E58,G21,G28
- 29 August 2024
-
Working Paper Series - Issue No. 2978Details
- Abstract:
- Over the last decades, macro-economists have renewed their efforts to reduce the gap between monetary macroeconomics and real-world central banking. This paper reviews how macroeconomics has since 2016 approached the possible introduction of retail central bank digital currencies (CBDC). A review of the literature reveals that macroeconomic models of CBDC often rely on CBDC design features and narratives which are no longer in line with the one of central banks actually working on CBDC. In particular, the literature often (i) does not take into account the nature of central banks’ CBDC issuance plans as a “conservative” reaction to profound technological and preferential shifts in the use of money as a means of payments, (ii) does not start from design features communicated by central banks, such as no-remuneration, quantity limits, access restrictions, and automated sweeping functionality linking CBDC wallets with commercial bank accounts; (iii) does not explain well enough the difference between CBDC and banknotes within their macro-economic models, apart from remuneration (which central banks actually do not foresee); and (iv) assume that CBDC will lead to a significant increase in the total holdings of central bank money in the economy, although (i) and (ii) make this unlikely.
- JEL Code:
- E3,E5,G1
- 28 August 2024
-
Working Paper Series - Issue No. 2977Details
- Abstract:
- We build a model of the aggregate housing and rental markets in which houseprices and rents are determined endogenously. Households can choose their housingtenure status (renters, homeowners, or landlords) and the size of their homes dependingon their age, income and wealth. We use our model to study the impact of changesin credit conditions on house prices, rents and household welfare. We analyse theintroduction of policies that limited loan-to-value (LTV) and loan-to-income (LTI) ratiosof newly originated mortgages in Ireland in 2015 and find that, consistent with empiricalevidence, they mitigate house price growth but increase rents. Homeownership ratesdrop, and young and middle-income households are negatively affected by the reform.An unexpected permanent rise in real interest rates has similar effects – by makingmortgages more expensive and alternative investments more attractive for landlords, itincreases rents relative to house prices.
- JEL Code:
- D15,E21,E30,E51,G51
- 28 August 2024
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Monetary developments in the euro areaAnnexes
- 28 August 2024
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Monetary developments in the euro area
- 27 August 2024
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Weekly financial statementAnnexes
- 27 August 2024
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Weekly financial statement - Commentary
- 27 August 2024
-
Working Paper Series - Issue No. 2976Details
- Abstract:
- We use 25 years of tax records for the Norwegian population to study the mobility of wealth over people’s lifetimes. We find considerable wealth mobility over the life cycle. To understand the underlying mobility patterns, we group individuals with similar wealth rank histories using agglomerative hierarchical clustering, a tool from statistical learning. The mobility patterns we elicit provide evidence of segmented mobility. Over 60 percent of the population remains at the top or bottom of the wealth distribution throughout their lives. Mobility is driven by the remaining 40 percent, who move only within the middle of the distribution. Movements are tied to differential income trajectories and business activities across groups. We show parental wealth is the key predictor of who is persistently rich or poor, while human capital is the main predictor of those who rise and fall through the middle of the distribution.
- JEL Code:
- D31,E21,C23,C38,C55
- 26 August 2024
-
Survey of Monetary Analysts
- 24 August 2024
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SpeechDetails
- Subtitle:
- Contribution by Philip R. Lane, Member of the Executive Board of the ECB, to the panel on “Reassessing the effectiveness and transmission of monetary policy” at the Federal Reserve Bank of Kansas City Economic Symposium
- 23 August 2024
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Press release
- 22 August 2024
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Monetary policy accountRelated
- 18 July 2024
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Monetary policy decision
- 21 August 2024
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Working Paper Series - Issue No. 2975Details
- Abstract:
- Using a novel dataset linking firm level data from the Survey on Access to Finance of Enterprises (SAFE) and bank level data from the Bank Lending Survey (BLS), we explore how changes in credit standards pass through to firms at a granular level. We find that tighter credit standards decrease loan availability reported by firms, increase the likelihood they report access to finance as the worst problem and decrease their investment. After controlling for country-sector-time fixed effects that capture cyclical macroeconomic conditions, effects only remain for firms that need finance. Moreover, we find that a more diversified funding base insulates firms from the negative impacts of tighter credit standards on availability of bank loans and access to finance, although there is little evidence of such an effect forinvestment. Effects are asymmetric, with stronger impacts recorded for a tightening than an easing. Our results underscore the importance of demand conditions when interpreting the credit conditions and we thus propose a new indicator of demand adjusted credit standards at a euro area level, which can be used to analyse broader credit dynamics.
- JEL Code:
- D22,E22,E52
- 20 August 2024
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Weekly financial statementAnnexes
- 20 August 2024
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Weekly financial statement - Commentary
- 20 August 2024
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Balance of payments (monthly)
- 15 August 2024
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The ECB BlogDetails
- JEL Code:
- D10,D14,E20,E21,D83
- Subtitle:
- How quickly do consumers react to rate hikes? The answer depends in part on how much they know about financial matters. This ECB Blog post shows that the better informed they are, the quicker their reaction.
- 14 August 2024
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Working Paper Series - Issue No. 2974Details
- Abstract:
- We analyze how corporate reorganization and liquidation change labor reallocation during bankruptcy using randomized judge assignments and linked Portuguese employer-employee and firm data. Reorganization reduces the negative effect of bankruptcy on employee earnings, even with most workers leaving reorganized firms. We examine plausible mechanisms and find evidence that the retention of general skills and improved job-match quality contribute meaningfully to this effect. The average cost of labor misallocation caused by reorganization is small. However, for some workers in the least productive filers, this cost can be large, outweighing the effect on earnings.
- JEL Code:
- G33,G38,J24,J63,K39
- 14 August 2024
- 14 August 2024
- 14 August 2024
- 14 August 2024
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Other publication
- 13 August 2024
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Weekly financial statementAnnexes
- 13 August 2024
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Weekly financial statement - Commentary
- 8 August 2024
- 8 August 2024
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Working Paper Series - Issue No. 2973Details
- Abstract:
- Monetary policy decisions by the Federal Reserve System in the US are widely recognised to have spillover effects on the rest of the world. In this paper, we focus on the asymmetric effects of US monetary policy shocks on macro-financial outcomes in emerging market economies (EMEs). We shed light on how domestic factors shape external monetary policy spillover effects using indicators on the macro-financial vulnerabilities and monetary policy stances of EMEs. We find that a surprise tightening of monetary policy in the US leads to an immediate tightening of financial conditions which leads to a decline in activity and prices in EMEs over one year. Importantly, these effects are amplified in periods of high vulnerabilities and attenuated when EMEs follow a prudent monetary policy stance. Our findings help explain the greater resilience of many EMEs to the Fed’s post-COVID-19 tightening cycle, and highlight the benefits of the broad improvements of monetary policy frameworks in these countries.
- JEL Code:
- F42,E58,E52,C32
- 8 August 2024
- 7 August 2024
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Working Paper Series - Issue No. 2972Details
- Abstract:
- In this paper, we investigate the presence of non-linearities in the transmission of geopolitical risk (GPR) shocks. Our methodology involves incorporating a non-linear function of the identified shock into a VARX model and examining its impulse response functions and historical decomposition. We find that the primary transmission channel of such shocks is associated with heightened uncertainty,which significantly escalates only with substantially large GPR shocks (i.e., above 4 standard deviations). This increase in uncertainty prompts precautionary saving behaviors, exerting a strong impact on consumption and reducing activity. The response of inflation is more subdued, reflecting both diminished demand and heightened uncertainty, which influence prices in opposing directions.
- JEL Code:
- C30,D80,E32,F44,H56
- 7 August 2024
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Working Paper Series - Issue No. 2971Details
- Abstract:
- Households' income heterogeneity is important to explain consumption dynamics in response to aggregate macro uncertainty: an increase in uncertainty generates a consumption drop that is stronger for income poorer households. At the same time, labor markets are strongly responsive to macro uncertainty as the unemployment rate and the job separation rate rise, while the job finding rate falls. A heterogeneous agent New Keynesian model with search and matching frictions in the labor market can account for these empirical findings. The mechanism at play is a feedback loop between income poorer households who, being subject to higher unemployment risk, contract consumption more in response to heightened uncertainty, and firms that post fewer vacancies following a drop in demand.
- JEL Code:
- E12,E31,E32,J64
- 6 August 2024
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Weekly financial statementAnnexes
- 6 August 2024
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Weekly financial statement - Commentary
- 6 August 2024
-
Working Paper Series - Issue No. 2970Details
- Abstract:
- We build a balance sheet-based model to capture run risk, i.e., a reduced potential to raise capital from liquidity buffers under stress, driven by depositor scrutiny and further fuelled by fire sales in response to withdrawals. The setup is inspired by the Silicon Valley Bank (SVB) meltdown in March 2023 and our model may serve as a supervisory analysis tool to monitor build-up of balance sheet vulnerabilities. Specifically, we analyze which characteristics of the balance sheet are critical in order for banking system regulators to adequately assess run risk and resilience. By bringing a time series of SVB’s balance sheet data to our model, we are able to demonstrate how changes in the funding and respective asset composition made SVB prone to run risk, as they were increasingly relying on heldto-maturity, aka hidden-to-maturity, accounting standards, masking revaluation losses in securities portfolios. Finally, we formulate a tractable optimisation problem to address the designation of heldto-maturity assets and quantify banks’ ability to hold these assets without resorting to remarking. By calibrating this to SVB’s balance sheet data, we shed light on the bank’s funding risk and impliedrisk tolerance in the years 2020–22 leading up to its collapse.
- JEL Code:
- C62,G21,G11
- 6 August 2024
-
Working Paper Series - Issue No. 2969Details
- Abstract:
- Combining euro-area credit register and carbon emission data, we provide evidence of a climate risk-taking channel in banks’ lending policies. Banks charge higher interest rates to firms featuring greater carbon emissions, and lower rates to firms committing to lower emissions, controlling for their probability of default. Both effects are larger for banks committed to decarbonization. Consistently with the risk-taking channel of monetary policy, tighter policy induces banks to increase both credit risk premia and carbon emission premia, and reduce lending to high emission firms more than to low emission ones. While restrictive monetary policy increases the cost of credit and reduces lending to all firms, its contractionary effect is milder for firms with low emissions and those that commit to decarbonization.
- JEL Code:
- E52,G21,Q52,Q53,Q54,Q58
- 5 August 2024
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Working Paper Series - Issue No. 2968Details
- Abstract:
- This paper uses a Bayesian Structural Vector Autoregressive (BSVAR) framework to estimate the pass-through of unexpected gas price supply shocks on HICP inflation in the euro area and its four largest economies. In comparison to oil price shocks, gas price shocks have approximately one-third smaller pass-through to headline inflation. Country-specific results indicate gas price increases matter more for German, Spanish and Italian inflation than for French inflation, hinging on the reliance on energy commodities in consumption, production, and different electricity prices regulation. Consistent with gas becoming a prominent energy commodity in the euro area, including time-variation through a time-varying parameter BVAR demonstrates a substantially larger impact of gas price shocks on HICP inflation in recent years. The empirical estimates are then rationalized using a New Keynesian Dynamic Stochastic General Equilibrium (NK-DSGE) model augmented with energy. In the model, the elasticity of substitution between gas and non-energy inputs plays a critical role in explaining the inflationary effects of gas shocks. A decomposition of the recent inflation dynamics into the model structural shocks reveals a larger contribution of gas shocks compared to oil shocks.
- JEL Code:
- C11,C32,E31,Q41
- 4 August 2024
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Occasional Paper Series - Issue No. 354Details
- Abstract:
- The monitoring and analysis of the business cycle is a central element of inputs to monetary policy decision-making. This report contributes to the analysis of business cycles in the euro area in three dimensions. First, in terms of business cycle dating, it proposes automated procedures to characterise the business cycle situation of the euro area and its main components, across countries and sectors. Second, it investigates how business cycle synchronisation has evolved over the last 20 years. Third, it analyses business cycle drivers from several perspectives, including the financial and international dimension, interconnectedness, demand and supply. It also features an early analysis of the economic implications of the COVID-19 pandemic. Rather than reaching strong conclusions on the history of the euro area business cycle, the primary aim of the report is to promote sound methods and approaches that are part of ongoing enhancements of the analytical infrastructure designed to analyse hard-to-ascertain questions on the nature and characteristics of euro area business cycle dynamics.
- JEL Code:
- C10,E32,E37
- 2 August 2024
-
Working Paper Series - Issue No. 2967Details
- Abstract:
- We study how monetary policy shapes the aggregate and distributional effects of an energy price shock. Based on the observed heterogeneity in consumption exposures to energy and household wealth, we build a quantitative small open-economy HANK model that matches salient features of the Euro Area data. Our model incorporates energy as both a consumption good for households with non-homothetic preferences as well as a factor input into production with input complementarities. Independently of policy energy price shocks always reduce aggregate consumption. Households with little wealth are more adversely affected through both a decline in labor income as well as negative direct price effects. Active policy responses raising rates in response to inflation amplifies aggregate outcomes through a reduction in aggregate demand, but speeds up the recovery by enabling households to rebuild wealth through higher returns on savings. However, low-wealth households are further adversely affected as they have little savings to rebuild wealth from and instead loose due to further declining labor income.
- JEL Code:
- E52,F41,Q43
- Network:
- Challenges for Monetary Policy Transmission in a Changing World Network (ChaMP)
- 2 August 2024
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Discussion Paper Series - Issue No. 25Details
- Abstract:
- We study whether it is desirable for the central bank to supply reserves abundantly, i.e. beyond the level that satisfies financial institutions’ aggregate liquidity needs. Using a theoretical framework, we demonstrate that abundant reserves would help fulfil the private sector’s demand for safe and liquid assets, because reserves affect financial institutions’ leverage constraints. More specifically, systematic central bank purchases of medium-term government bonds from financial institutions would relax those institutions’ leverage constraints and allow them to expand their balance sheets and issue more private liquidity, in the form of deposits. However, a very large increase in the average size of its balance sheet would expose the central bank to the risk of large financial losses. On balance, only amoderately larger supply of reserves than the level that satisfies financial institutions’ aggregate liquidity needs appears desirable.
- JEL Code:
- E41,E44,E58
- 1 August 2024
-
Press release
- 1 August 2024
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EBA/ECB report
- 1 August 2024
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Working Paper Series - Issue No. 2966Details
- Abstract:
- In this paper, we propose a new framework to jointly calibrate cyclical and structural capital requirements. For this, we integrate a non-linear macroeconomic model and a stress test model. In the macroeconomic model, the severity of the scenarios depends on the level of cyclical risk. Risk-related scenarios are used as inputs for the stress test model. Banks’ capital losses derived from a scenario based on a reference level of risk are used to set the structural requirement. Additional losses associated with the current risk scenario are used to set the cyclical requirement. This approach provides a transparent method to strike the balance between cyclical and structural requirements.
- JEL Code:
- C32,E51,E58,G01
- 1 August 2024
-
€STR Transparency on errors
- 1 August 2024
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Economic Bulletin
- 1 August 2024
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Economic Bulletin - BoxEconomic Bulletin Issue 5, 2024Details
- Abstract:
- This box presents the main results of the 2024 Ageing Report for the European Union Member States. Ageing-related fiscal costs in the euro area are projected to rise by 1.4 percentage points by 2070, increasing from 24.1% of GDP to stand at 25.6% of GDP, with notable variance across countries. These costs are a key consideration in assessing long-term fiscal sustainability.
- JEL Code:
- J11,H55,H68
- 1 August 2024
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Economic Bulletin - BoxEconomic Bulletin Issue 5, 2024Details
- Abstract:
- Since the 1980s the divergence between the returns on capital and on safe assets has increased. This box examines what might account for this wedge and finds that, while the capital risk premium is the main factor, partly reflecting the demand for safe assets and a general decline in their supply, mark-ups also play a role. Since the pandemic, divergence has increased in the euro area, while it has remained broadly stable, albeit wider, in the United States, with mark-ups playing a greater role. During this period, the contribution from the risk premium has marginally increased in the euro area, whereas mark-ups have slightly decreased. In the United States, both the risk premium and mark-ups are largely unchanged. The elevated risk premium, to the extent that it reflects capital market imperfections, is one potential explanation for subdued investment levels in the euro area, which also pose a challenge to meeting the substantial investment needed to advance the green transition.
- JEL Code:
- E01,E6
- 1 August 2024
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Economic Bulletin - BoxEconomic Bulletin Issue 5, 2024Details
- Abstract:
- Available surveys of selling price expectations of firms for the euro area point to price dynamics that have substantially moderated after the recent large inflationary shock, albeit with a more sluggish adjustment for services than for goods. This box focuses on services and investigates the leading indicator properties of the forward-looking survey data provided by the European Commission. These data tend to anticipate notable turning points in services inflation. In addition, in a forecasting exercise, we find that their leading properties manifest in a non-linear way and are particularly useful in unusual times, such as during the recent inflation spike.
- JEL Code:
- E31,E37,D84
- 1 August 2024
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Economic Bulletin - BoxEconomic Bulletin Issue 5, 2024Details
- Abstract:
- Euro area inflation differentials rose sharply during the pandemic and the energy crisis but have since largely returned to previous levels. Monitoring the evolution and nature of inflation differentials is informative when assessing the transmission of the single monetary policy. This box puts the recent developments in inflation dispersion into perspective. Headline inflation and its subcomponents have all experienced considerable divergences across countries, with energy and food inflation playing a significant role. However, with a few exceptions, these temporarily sizeable differentials did not result in substantial changes in relative price levels across countries.
- JEL Code:
- E31,E58,E65
- 1 August 2024
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Economic Bulletin - BoxEconomic Bulletin Issue 5, 2024Details
- Abstract:
- This box considers the outlook for euro area business investment growth in 2024, as inferred from recent surveys. While suggesting a muted outlook for business investment growth this year, the surveys reveal considerable cross-country and cross-sectoral variation. Southern euro area countries and sectors with stronger demand appear more inclined to expand investment, whereas investment intentions in energy-intensive sectors have become weaker since the 2022-23 energy crisis. While investment priorities have changed somewhat in the face of recent shocks, scope remains for considerable expansion in business investment, not least related to the green and digital transitions.
- JEL Code:
- E22,E66
- 1 August 2024
-
Economic Bulletin - BoxEconomic Bulletin Issue 5, 2024Details
- Abstract:
- A combination of various adverse shocks has contributed to productivity growth being suppressed in the euro area over the last four years. In the first quarter of 2024 productivity per person employed was 0.7% lower than in the fourth quarter of 2019 and productivity per hour worked was just 0.7% higher. The pandemic, along with disruptions in global supply chains and the rise in energy prices from 2021, which were aggravated by the repercussions from the Russian war in Ukraine, have all contributed to a slowdown in productivity growth. While there are some differences, the slowdown is broad-based across sectors and the five largest euro area economies. A shift-share analysis shows that the documented slowdown in productivity is the result of within-sector developments and not of a reallocation of labour to less productive sectors.
- JEL Code:
- E24
- 1 August 2024
-
Economic Bulletin - BoxEconomic Bulletin Issue 5, 2024Details
- Abstract:
- Based on granular data at the product level, this box discusses whether and how the euro area and the United States have modified their import sourcing strategies since 2016, the role played by geopolitical tensions and the potential impact on import prices. It considers two different, but not mutually exclusive, strategies: increasing the number of sourcing countries and reducing the import market share of the main supplier country per product. Data suggest that both regions have increased, on average, the number of sourcing countries, particularly for those products mostly imported from geopolitically distant countries. Broadening the number of supplier countries has come at a cost,however, it has affected only a small share of total imports, with modest implications for inflation and the terms of trade. At the same time, evidence of a reduction in the import share of the main supplier country is more mixed and is generally associated with a shift towards cheaper – and not necessarily geopolitically closer – countries, suggesting the prevalence of cost considerations over supply-chain resilience and national security concerns.
- JEL Code:
- F14,F51,F62
- 31 July 2024
- 31 July 2024
-
Working Paper Series - Issue No. 2965Details
- Abstract:
- This paper introduces ECB-(RE)BASE as the model-consistent, or rational expectation version of the ECB-BASE model. It brings new analytical capabilities to consider varying degrees of heterogeneity in expectation formation across the agents of the model. While the original version of ECB-BASE features VAR-based expectations, we examine two alternative versions either with full model-consistent expectations or with hybrid expectations. The paper provides a didactic exposition of the changes in the model properties brought by the various expectation settings. Furthermore, we conduct illustrative scenarios around the macroeconomic shocks experienced over the recent years. The simulations notably suggest that moving from VAR-based to model-consistent expectations would limit the pandemic-induced macroeconomic volatility but would exacerbate the price pressures during the inflation surge period. Overall, this model development extends the range of possibilities for risk and policy analysis which can enhance the contribution of ECB-(RE)BASE to monetary policy preparation.
- JEL Code:
- C3,C5,E1,E2,E5
- 31 July 2024
-
Working Paper Series - Issue No. 2964Details
- Abstract:
- This article measures the degree of potential de-anchoring of inflation expectations in the euro area vis-à-vis the inflation objective of the European Central Bank (ECB). A no-arbitrage term structure model that allows for a time-varying long-term mean of inflation expectations, π∗t , is applied to inflation-linked swap (ILS) rates, while taking into account survey-basedinflation forecasts. Estimates of π∗t have been close to 2% since the mid-2000s, indicating that long-term inflation expectations have overall remained well anchored to the ECB’s inflation objective. As this objective is however related to the "medium term", expectations components of various forward ILS rates are extracted: they appear to have been broadlyanchored, with tentative signs of de-anchoring up to the two-year horizon. Using backcasted ILS rates, estimates of π∗t are much above 2% in the early 1990s, but they convergence to levels below 2% by the end of the decade when the ECB was established.
- JEL Code:
- E31,E43,E47,E58
- 31 July 2024
-
The ECB BlogDetails
- JEL Code:
- E50,E59
- Subtitle:
- Central banks choose their words very carefully. And rightly so – policy makers’ wording can move markets and, eventually, the economy. This ECB Blog post shows how unexpected changes in communication influence growth and inflation.
- 31 July 2024
-
MFI interest rate statistics
- 31 July 2024
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Economic Bulletin - ArticleEconomic Bulletin Issue 5, 2024Details
- Abstract:
- This article provides a technical evaluation of the performance of ECB/Eurosystem staff inflation projections since 2000. It complements the existing literature by examining the influence of HICP components as well as conditioning variables on the properties of HICP inflation projections, also taking into account potential time variation in forecast performance. The article shows how, from the low projection errors over the period leading up to the pandemic, Eurosystem/ECB staff forecast accuracy deteriorated in the face of atypical post-pandemic shocks before improving again since late 2022. However, it finds that the accuracy of Eurosystem/ECB staff projections of headline HICP inflation is broadly comparable to real-time market-based and private professional forecasts even after including the post-pandemic period of high inflation. The HICP forecast accuracy is comparable across main HICP components, including HICP excluding energy and food (HICPX), although HICPX inflation projections tend to show smaller errors than headline inflation projections. The article finds that ECB/Eurosystem staff inflation projections are unbiased overall but exhibit specific periods over the last 25 years in which this unbiasedness broke down. It also points to some rigidities in ECB/Eurosystem staff inflation projections, in particular for HICPX, which might explain part of this occasional bias. Finally, the article underscores the contribution of not only oil price assumptions but also other conditioning assumptions to the rigidities, occasional bias and reduced accuracy of ECB/Eurosystem staff projections of HICP inflation.
- JEL Code:
- C53,E37,E58
- 30 July 2024
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Disaggregated financial statement
- 30 July 2024
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Weekly financial statementAnnexes
- 30 July 2024
-
Weekly financial statement - Commentary
- 30 July 2024
-
Working Paper Series - Issue No. 2963Details
- Abstract:
- This paper examines the use of ETFs by open-ended investment funds in the euro area to manage liquidity. We find that during the COVID-19 market turmoil, investment funds were the most run-prone investor type in the market for ETFs. We also show that open-ended funds that faced larger outflows in March 2020 scaled down their ETF holdings by a larger amount. These results are consistent with open-ended funds passing on their outflows to the ETF shares they held. Since open-ended investment funds are the largest group of ETF investors in the euro area, their trading can materially impact primary ETF flows during times of stress.
- JEL Code:
- G01,G11,G23
- 30 July 2024
-
Working Paper Series - Issue No. 2962Details
- Abstract:
- The European fiscal governance framework remains incomplete, hindering policy coordination during economic shocks and affecting the transmission of the single monetary policy. High public debt and low public investment worsen resilience across Member States. Many policymakers, institutions, and academics support establishing a central fiscal capacity (CFC) as a solution. Against this backdrop, we propose a framework to assess a CFC in the euro area, aimed at stabilizing the business cycle, promoting sovereign debt sustainability, and reducing procyclicality in public investment. Our two-region DSGE model with a permanent CFC allocates resources based on the relative output gap while earmarking funds for public investment and imposing fiscal adjustment requirements for the high-debt region. The CFC enhances business cycle stabilization for both regions and significantly reduces the welfare cost of fluctuations. We also explore European bond issuance and a supranational investment strategy to address investment needs through European Public Goods.
- JEL Code:
- E12,E32,E62,F45
- 30 July 2024
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Economic Bulletin - ArticleEconomic Bulletin Issue 5, 2024Details
- Abstract:
- This article introduces the Distributional Wealth Accounts (DWA) developed by the European System of Central Banks and explores some of their main features and use cases. First, it describes the methodology behind DWA compilation, detailing data sources, estimation techniques and the significance of the dataset for economic analysis. It then highlights key stylised evidence on the changes in the wealth distribution of households over time and across countries. In this context, it highlights the heterogeneous portfolio composition and the varied effects of housing and financial asset prices on wealth accumulation, and their implications for inequality. Finally, the article investigates how the recent surge in inflation and the subsequent monetary policy tightening have affected the distribution of wealth.
- JEL Code:
- E4,E44,E5,E52,G21
- 29 July 2024
-
Working Paper Series - Issue No. 2961Details
- Abstract:
- This paper introduces a New Keynesian multi-sector industry model that integrates firm heterogeneity, entry, and exit dynamics, while considering energy production from both fossil fuels and renewables. We investigate the effects of a sustained increase in fossil fuel prices on sectoral size, labor productivity, and inflation. A hike in the price of fossil resources results in higher energy prices. Due to ex-ante heterogeneity in energy intensity in production, the profitability of sectors is impacted asymmetrically.As production costs rise, less efficient firms leave the market, while new entrants must display higher idiosyncratic productivity. While this process enhances average labor productivity, it also results in a lasting decrease in the entry of new firms. A central bank with a strong anti-inflationary stance can circumvent the energy price increase and mitigate its inflationary effects by curbing rising production costs. This policy entails a higher impact cost in terms of output and lower average productivity, but leads to a faster recovery in business dynamism. Thus, our results suggest that monetary policy faces a trade-off between stabilizing aggregate activity and business dynamism.
- JEL Code:
- E62,L16,O33,Q43
- 29 July 2024
-
Working Paper Series - Issue No. 2960Details
- Abstract:
- Rising trade tensions, a spate of trade-inhibiting policy measures and a weakening of multilateral institutions have sparked a growing concern about the potential implications of global trade fragmentation. Yet, empirical evidence that geopolitical considerations are already materially affecting trade flows is scant. In this study, we quantify the impact of geopolitical tensions on trade of manufacturing goods over the period 2012-2022 in a structural gravity framework. To capture the influence of geopolitical tensions, we use a measure of geopolitical distance based on UN General Assembly voting. The econometric analysis offers robust evidence that geopolitical distance has become a trade friction and its impact has steadily increased over time. Our results suggest that a 10% increase in geopolitical distance, like the observed increase in the US-China distance since 2018, is associated with a reduction in trade by about 2%. Our findings also highlight a differential and stronger impact on advanced economies and the emergence of friend-shoring.
- JEL Code:
- F10,F13,F14,F15
- 29 July 2024
-
Economic Bulletin - ArticleEconomic Bulletin Issue 5, 2024Details
- Abstract:
- China’s investment-led growth model enabled an unparalleled period of high growth and economic development. However, the rate at which China can productively absorb investment is declining as its economy matures. Nevertheless, the most recent policy approach to address economic weakness is to double down on its investment-centric approach and to identify new productive sources, which is widely expected to increase already existing overcapacities. Efforts to direct these overcapacities to export markets, often through lower prices or prices made competitive by comparatively high rates of state subsidies, will have global implications for China’s trading partners. Lower priced exports could lead to spillovers of disinflationary pressures, both through direct and indirect effects via changes in the pricing behaviour of trading partners’ domestic firms. China's growing dominance in global exports of advanced manufacturing and green technology will affect competitiveness among China’s major trading partners. Industrial and trade policies will be increasingly important in determining the economic outcome of China’s trade relations.
- JEL Code:
- O4,O53,E22,F4
- 26 July 2024
-
InterviewDetails
- Subtitle:
- Interview with Isabel Schnabel, Member of the Executive Board of the ECB, conducted by Christian Siedenbiedel on 22 July 2024
- 26 July 2024
-
Working Paper Series - Issue No. 2959Details
- Abstract:
- In the aftermath of the European sovereign debt crisis, the question of who should bear the burden of banking crises has been a cornerstone of the new supervisory framework in Europe. We evaluate the bail-in regulation (BRRD) for bank bond holdings using a proprietary database covering holdings of all euro-denominated securities. We focus on hard-to-value bailinable bank bonds and show that banks increased their holdings of bailinable bank bonds while households and non-financial corporations reduced their holdings of bailinable bonds issued by riskier banks.
- JEL Code:
- G21,G28
- 26 July 2024
-
Working Paper Series - Issue No. 2958Details
- Abstract:
- We study the heterogeneous pass-through of carbon pricing on investment across firms. Using balance sheet data of 1.2 million European firms and identified carbon policy shocks, we find that higher carbon prices reduce investment, on average. However, less carbon-intensive firms and sectors reduce their investment relatively more compared to otherwise similar firms after a carbon price tightening shock. Following carbon price tightening, firms in demand-sensitive industries see a relative decrease not only in investment but also in sales, employment and cashflow. Moreover, we find no evidence that higher carbon prices incentivise carbon-intensive firms to produce less emission-intensively. Overall, our results are consistent with theories of the growth-hampering features of carbon price increases and suggest that carbon pricing policy operates as a demand shock.
- JEL Code:
- Q54,Q58,D22,H23
- 26 July 2024
-
Euro area economic and financial developments by institutional sector (full)
- 26 July 2024
-
Press release
- 25 July 2024
-
Payment instruments and systemsAnnexes
- 25 July 2024
-
Payment instruments and systems
- 25 July 2024
-
Monetary developments in the euro areaAnnexes
- 25 July 2024
-
Monetary developments in the euro area
- 24 July 2024
-
Occasional Paper Series - Issue No. 353Details
- Abstract:
- This paper explores the relationship between banks and stablecoins and their issuers, focusing on the mechanical effects on banks’ capital and liquidity ratios when issuing stablecoins or collecting deposits from stablecoin issuers.The analysis reveals that converting retail deposits into stablecoin issuers’ deposits weakens a bank’s liquidity coverage ratio (LCR), turning a retail deposit into a wholesale deposit, even when these funds are reinvested in high-quality liquid assets. If a credit institution issues its own stablecoins, the impact on its LCR depends on whether it can identify the stablecoin holders; unknown holders weaken the LCR which could incentivise banks to issue stablecoins where they can continually identify the holders to benefit from more favourable liquidity treatment. Additionally, banks must either hold the reserves backing the stablecoins as central bank reserves or reinvest them in low-risk assets, making these funds a less effective source for economic financing and maturity transformation compared with traditional retail deposits. The study also finds that when retail customers of bank A buy a stablecoin issued by a non-bank that keeps reserves at bank B, both banks could see an unexpected decline in their liquidity ratios, as bank A loses stable retail deposits and bank B gains volatile wholesale deposits. These insights are crucial to understanding the dynamics between banks and stablecoins in the evolving financial landscape.
- JEL Code:
- E40,E42,E49,G11,G15,G18,G20,G21,G23,G28
- 24 July 2024
-
Working Paper Series - Issue No. 2957Details
- Abstract:
- We document novel survey-based facts about preferred long-run inflation rates among US consumers. Consumers on average prefer a 0.20% annual inflation rate, well below the Federal Reserve’s 2% target. Inflation preferences not only correlate with demographic and socioeconomic characteristics, but also with economic reasoning. A randomized control trial reveals that two narratives based on economic models—describing how inflation lowers the real value of wages and money holdings—affect inflation preferences. While our results can inform the design of central bank communication on inflation targets, they also raise questions about the alignment between such targets and consumer preferences.
- JEL Code:
- C83,E31,E52
- 24 July 2024
-
Working Paper Series - Issue No. 2956Details
- Abstract:
- We study the importance of information technology (IT) in banking for entrepreneurship. Guided by a parsimonious model, we establish that job creation by young firms is stronger in US counties more exposed to banks with greater IT adoption. We present evidence consistent with banks' IT adoption spurring entrepreneurship through a collateral channel: entrepreneurship increases by more in IT-exposed counties when house prices rise. Further analysis suggests that IT improves banks' ability to determine collateral values, in particular when collateral appraisal is more complex. IT also reduces the time and cost of disbursing collateralized loans.
- JEL Code:
- D82,G21,L26
- 23 July 2024
-
Digital Euro Preparation Phase documentAnnexes
- 23 July 2024
-
Digital Euro Preparation Phase document
- 23 July 2024
-
Digital Euro Preparation Phase document
- 23 July 2024
-
Weekly financial statementAnnexes
- 23 July 2024
-
Weekly financial statement - Commentary
- 23 July 2024
-
Working Paper Series - Issue No. 2955Details
- Abstract:
- We analyze the optimal window length in the average inflation targeting rule within a Behavioral THANK model. The central bank faces an occasionally binding effective lower bound (ELB) or persistent supply shocks, and can also use quantitative easing. We show that the optimal averaging period is infinitely long given a conventional degree of myopia. Finite yet long-lasting windows dominate for higher cognitive discounting; i.e., the makeup property is shown to be qualitatively resistant to deviation from rational expectations. We point out that the optimal window may depend on the speed of return to the target path. We solve the model both locally and globally to disentangle the effects of uncertainty due to the ELB. The welfare loss difference between solution techniques is considerably decreasing in the degree of history dependence.
- JEL Code:
- E31,E32,E52,E58,E71
- 23 July 2024
-
Working Paper Series - Issue No. 2954Details
- Abstract:
- We study the sensitivity of the realised LGD to macroeconomic conditions by exploring Global Credit’s confidential dataset on observed cash flows from defaulted loans. Given the prolonged duration of loan recovery, spanning several years, and the potential for macroeconomic fluctuations during this time frame, our study explores whether the sensitivity of realised LGD to macroeconomic conditions varies based on the timing of cash flows. We find that, regardless of the cash flow timing, the sensitivity of the LGD to macroeconomic conditions is higher for real-estate secured loans than for unsecured loans. The most relevant macroeconomic variables for the secured LGD are unemployment rate and stock returns, followed by house prices and the long-term interest rate. For unsecured loans, real GDP growth and stock returns are the most relevant predictors. These results may be relevant for both micro and macroprudential policymakers by informing on the procyclicality of risk parameters and bank capital requirements.
- JEL Code:
- G21,G32,G33,E32
- 23 July 2024
-
The ECB BlogDetails
- JEL Code:
- E51,E52,E58
- Subtitle:
- Repo markets are vital for banks to source liquidity and securities. They also represent an essential link in the monetary policy transmission chain. While the Eurosystem is in the process of reducing its market footprint, repo markets are going through a phase of change. The ECB Blog looks at dynamics in this market.
- 23 July 2024
-
SpeechDetails
- Subtitle:
- Welcome address by Philip R. Lane, Member of the Executive Board of the ECB, at the Joint ECB-IMF-IMFER Conference 2024
Annexes- 23 July 2024
-
Speech
- 23 July 2024
-
Research Bulletin - Issue No. 121Details
- Abstract:
- Households differ considerably in terms of the inflation they experience at any point in time. The main reasons for this are that prices (and thus price changes) differ from place to place and that households do not all buy the same products. Households adjust their purchases over time, but not enough to offset these differences.
- JEL Code:
- D12,D30,E31,F45
- 23 July 2024
-
InterviewDetails
- Subtitle:
- Interview with Luis de Guindos, Vice-President of the ECB, conducted by Sergio Rivas
- 22 July 2024
-
Working Paper Series - Issue No. 2952Details
- Abstract:
- This paper provides a first empirical analysis of the impact of the European Central Bank’s (ECB’s) climate-risk-related supervisory efforts on (i) climate risk exposure and related risk management of banks; and (ii) on the induced shifts in banks’ portfolio choices with regard to additional green finance. From 2020 onwards, the ECB has introduced various measures to enhance climate-risk-related supervisory efforts. Our identification strategy exploits the fact that the ECB’s efforts on climate supervision has only been introduced for selected banks within the European Union i.e., the Significant Institutions under the Single Supervisory Mechanism. Other banks (i.e., the Less Significant Institutions) have remained unaffected. We set up a difference-in-difference setup based on a novel data set and find a significant impact on both improvements in climate risk exposure and management and on an increase in banks’ green finance activities.
- JEL Code:
- D25,G21,G28
- 22 July 2024
-
Working Paper Series - Issue No. 2953Details
- Abstract:
- Since the advent of Heterogeneous Agent New Keynesian (HANK) models, countercyclical unemployment risk has been deemed an important amplification mechanism for business cycles shocks. Yet, the aggregate effects of such “unemployment fears” are hard to pin down. We thus revisit this issue in the context of a rich two-asset HANK model, proposing new ways to isolate their general equilibrium effects and tackle the long-standing challenge of modelling wage bargaining in this class of model. While unemployment fears can exert noticeable aggregate effects, we find their magnitude to depend importantly on the distribution of firm profits. Households’ ability to borrow stabilizes the economy. Our framework has also implications for policy: in the aftermath of an adverse energy price shock, fiscal policy can help reducing the hysteresis effects on unemployment and most households gain if the central bank accommodates an employment recovery at the cost of higher inflation.
- JEL Code:
- D52,E24,E52,J64
- 22 July 2024
-
Survey of Monetary Analysts - Aggregate results
- 19 July 2024
-
Governing Council decisions - Other decisions
- 19 July 2024
-
Press releaseAnnexes
- 19 July 2024
-
Balance of payments (monthly)
- 19 July 2024
-
Press releaseRelated
- 19 July 2024
-
Survey of Professional Forecasters
- 19 July 2024
-
Survey of Professional ForecastersAnnexes
- 19 July 2024
Related- 19 July 2024
- 19 July 2024
-
Economic Bulletin - BoxEconomic Bulletin Issue 5, 2024Details
- Abstract:
- This box summarises the findings of recent contacts between ECB staff and representatives of 62 leading non-financial companies operating in the euro area. According to these exchanges, which took place between 17 and 26 June 2024, aggregate activity continued to pick up in the second quarter, amid increasing signs of a modest, consumption-led recovery. The outlook for investment remained subdued, however, with uncertainty still high. Price growth was moderate and continued to be stronger in services than in industry. Wage growth was expected to slow further next year, while still compensating to some extent for past inflation.
- JEL Code:
- E2,E3,L2
- 18 July 2024
- 18 July 2024
-
Monetary policy statementDetails
- Subtitle:
- Christine Lagarde, President of the ECB, Luis de Guindos, Vice-President of the ECB, Frankfurt am Main, 18 July 2024
Related- 18 July 2024
-
Combined monetary policy decisions and statement
- 18 July 2024
-
Monetary policy decision
- 18 July 2024
-
Combined monetary policy decisions and statementRelated
- 18 July 2024
-
Monetary policy statement
- 18 July 2024
-
Monetary policy decisionRelated
- 18 July 2024
-
Combined monetary policy decisions and statement
- 16 July 2024
-
Weekly financial statementAnnexes
- 16 July 2024
-
Weekly financial statement - Commentary
- 16 July 2024
-
Press releaseRelated
- 16 July 2024
-
Euro area bank lending survey
- 16 July 2024
-
Euro area bank lending surveyAnnexes
- 16 July 2024
-
Euro area bank lending survey - Annex
Related- 16 July 2024
-
Press release
- 15 July 2024
-
Press releaseSurvey on the Access to Finance of Enterprises: moderate tightening in reported financing conditionsRelated
- 15 July 2024
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Survey on the Access to Finance of Enterprises in the euro area
- 15 July 2024
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Survey on the Access to Finance of Enterprises in the euro areaAnnexes
- 15 July 2024
-
SAFE questionnaire
Related- 15 July 2024
- 12 July 2024
-
public consultation - statistics
- 10 July 2024
-
Press releaseRelated
- 10 July 2024
-
Survey on credit terms and conditions in euro-denominated securities financing and OTC derivatives marketsAnnexes
- 10 July 2024
-
Other publication
- 10 July 2024
-
Working Paper Series - Issue No. 2951Details
- Abstract:
- Using granular data from the European corporate credit register, we examine how increases in macroprudential capital buffer requirements since the pandemic have affected bank lending behaviour in the euro area. Our findings reveal that, for the average bank, the buffer requirement increases did not have a statistically significant impact on lending to non-financial corporations. Furthermore, while we document relatively slower loan growth for banks with less capital headroom, also these banks did not decrease lending in absolute terms in response to higher requirements. These findings are robustin various specifications and emerge for both loan growth at the bank-firm level and the propensity to establish new bank-firm relationships. At the firm level, we document some heterogeneity depending on firm type and firm size. Firms with a single bank relationship and small and micro enterprises experienced a relative reduction in lending following buffer increases, although substitution effects mitigated real effects at the firm level. Overall, the results suggest that the pronounced macroprudential tightening since late 2021 did not exert substantial negative effects on credit supply.Hence, activating releasable capital buffers at an early stage of the cycle appears to be a robust policy strategy, since the costs of doing so are expected to be low.
- JEL Code:
- E5,E51,G18,G21
- 10 July 2024
-
The ECB BlogDetails
- JEL Code:
- D43,F51,F55
- Subtitle:
- The green transition will significantly increase demand for key minerals over the coming decades. The impact on energy prices will ultimately depend on how supply adjusts. The ECB Blog looks at the geopolitical risks involved.
- 9 July 2024
-
Weekly financial statementAnnexes
- 9 July 2024
-
Weekly financial statement - Commentary
- 9 July 2024
-
Working Paper Series - Issue No. 2950Details
- Abstract:
- We match granular supervisory and credit register data to assess the implications of banks’ exposure to interest rate risk on the monetary policy transmission to bank lending supply in the euro area. We exploit the largest and swiftest increase in interest rates since the creation of the euro and find that banks with a higher exposure to interest rate risk, i.e., with a larger duration gap after accounting for hedging, curtailed corporate lending more than their peers. Ceteris paribus, greater interest rate risk entails closer supervisory scrutiny and potential capital surcharges in the short term, and lower expected profitability and capital accumulation in the medium to long term. We then proceed to dissect banks’ credit allocation and find that banks with higher net duration reshuffled their loan portfolio away from long-term loans in an attempt to limit the increase in interest rate risk and targetedtheir lending contraction to small and micro firms. Firms exposed to banks with a larger exposure to interest rate risk were unable to fully rebalance their borrowing needs with other lenders, thus experiencing a relatively larger decrease in total borrowing during the monetary tightening episode.
- JEL Code:
- E51,E52,G21
- 8 July 2024
- 8 July 2024
-
T2S financial statement
- 4 July 2024
-
SpeechDetails
- Subtitle:
- Keynote speech by Piero Cipollone, Member of the Executive Board of the European Central Bank, at the National Conference of Statistics on official statistics at the time of artificial intelligence
- 4 July 2024
-
Monetary policy accountRelated
- 6 June 2024
-
Monetary policy decision
- 4 July 2024
-
Euro area economic and financial developments by institutional sector (early)
- 4 July 2024
-
SpeechDetails
- Subtitle:
- Slides by Philip R. Lane, Member of the Executive Board of the ECB, at the Master in Economics and Finance (MEF) 2024 Lecture in Naples
- 4 July 2024
-
MFI interest rate statistics
- 4 July 2024
-
Balance of payments (quarterly)
- 4 July 2024
-
The ECB BlogDetails
- JEL Code:
- D22,D81,D84
- Subtitle:
- Firms’ inflation expectations are key for monetary policy makers. The ECB Blog presents new survey data on these expectations, evidence on what influences them, how they change when new information becomes available, and if they matter for the plans and choices firms make.
- 3 July 2024
-
Disaggregated financial statement
- 3 July 2024
-
Weekly financial statementAnnexes
- 3 July 2024
-
Weekly financial statement - Commentary
- 1 July 2024
-
SpeechDetails
- Subtitle:
- Introductory speech by Christine Lagarde, President of the ECB, at the opening reception of the ECB Forum on Central Banking in Sintra, Portugal
Related- 7 July 2024
- 1 July 2024
-
Survey of Monetary Analysts
- 28 June 2024
-
Press release
- 28 June 2024
-
Governing Council statement
- 27 June 2024
-
Occasional Paper Series - Issue No. 352Details
- Abstract:
- The 2019 revision to the Capital Requirements Directive allowed the systemic risk buffer to be applied on a sectoral basis in the European Union. Since then an increasing number of countries have implemented the new tool, primarily to address vulnerabilities in the residential real estate sector. To inform and foster a consistent understanding and application of the buffer, this paper proposes two specific methodologies. First, an indicator-based approach which provides an aggregate measure of cyclical vulnerabilities in the residential real estate sector and can signal a potential need to activate a sectoral buffer to address them. Second, a model-based approach following a stress test rationale simulating mortgage loan losses under adverse conditions, which can be used as a starting point for calibrating a sectoral buffer. Besides these methodological contributions, the paper conceptually discusses the interaction between the sectoral buffer and other prudential requirements and instruments, ex ante and ex post policy impact assessment, and factors guiding the possible release of the buffer. Finally, the paper considers possible future applications of sectoral buffer requirements for other types of sectoral vulnerabilities, for example in relation to commercial real estate, exposures to non-financial corporations or climate-related risks.
- JEL Code:
- G21,G28
- 27 June 2024
-
The ECB BlogDetails
- JEL Code:
- E22,H50,H63
- Subtitle:
- Europe needs trillions of euros to manage climate change, become digital and defend itself. How can EU and national policymakers support these projects? This Blog post discusses the options in times of low growth and high public debt levels.
- 27 June 2024
-
Monetary developments in the euro areaAnnexes
- 26 June 2024
-
Monetary developments in the euro area
- 27 June 2024
-
Forum on Central Banking - Conference proceedings
- 27 June 2024
-
Forum on Central Banking - Conference proceedings
- 27 June 2024
-
Forum on Central Banking - Conference proceedings
- 27 June 2024
-
Research Bulletin - Issue No. 120Details
- Abstract:
- Large-scale asset purchases can impact the price of securities either directly, when securities are targeted by the central bank, or indirectly through portfolio rebalancing by private investors. We quantify both the direct impact and that of portfolio rebalancing, emphasising the role of investor heterogeneity. We use proprietary security-level data on asset holdings of different investors. We measure the direct impact at security level, finding that it is smaller for securities predominantly held by more price-elastic investors, i.e. funds and banks. Comparing securities at the 90th and 10th percentile of the investor elasticity distribution, the price impact of central bank purchases on the securities held by more price-elastic investors is only two-thirds as large. To assess the portfolio rebalancing effects, we construct a novel shift-share instrument. With this, we measure investors’ quasi-exogenous exposure to central bank purchases, based on their holdings of eligible securities before the quantitative easing (QE) programme was announced. We show that funds and banks sell eligible securities to the central bank and rebalance their portfolios towards ineligible securities, with those investors more exposed to central bank purchases ex ante engaging in more rebalancing. Using detailed holdings data for mutual funds, we estimate that for each euro of proceeds from selling securities to the central bank, the average fund allocates 88 cents to ineligible assets and 12 cents to other eligible assets that the central bank did not buy in that time period. The price of ineligible securities held by more exposed funds increases compared with those held by less exposed funds, underscoring the fact that the portfolio rebalancing channel is at work.
- JEL Code:
- E52,E58,G11,G12,G23
- 26 June 2024
-
SpeechDetails
- Subtitle:
- Speech by Philip R. Lane, Member of the Executive Board of the ECB, at the Bank of Finland’s International Monetary Policy Conference
- 26 June 2024
-
Press releaseRelated
- 26 June 2024
-
Convergence Report
- 26 June 2024
-
Convergence ReportRelated
- 26 June 2024
-
Press release
- 25 June 2024
-
Weekly financial statementAnnexes
- 25 June 2024
-
Weekly financial statement - Commentary
- 25 June 2024
- 25 June 2024
-
Climate-related financial disclosures
- 25 June 2024
-
Climate-related financial disclosures
- 25 June 2024
-
Statistics Paper Series - Issue No. 49Details
- Abstract:
- The nominal effective exchange rate (EER) of a currency is an index of the trade-weighted average of its bilateral exchange rates vis-à-vis the currencies of selected trading partners, while the real EER is derived by adjusting the nominal index for relative prices or costs. The nominal EER provides a summary measure of a currency’s external value, while the real EER is the most commonly used indicator of the international price and cost competitiveness of an economy. Additionally, for all individual euro area countries, harmonised competitiveness indicators (HCIs) are published by the European Central Bank (ECB) based on the same methodology as the euro EERs. This paper describes how the calculation of the ECB’s EERs and HCIs has been enhanced to take into account in the underlying trade weights the evolution of international trade linkages and, in particular, the growing importance of trade in services. The paper includes an in-depth description of the methodology used to calculate these enhanced EERs and HCIs. In particular, it presents how to overcome the challenges arising from the inclusion of services trade, foremost in terms of data availability, with imputation and estimation techniques. Importantly, the ECB’s well-established methodology – which in particular accounts for competition faced by euro area exporters in third markets – did not have to be changed with the inclusion of services trade. Finally, the paper provides some evidence on the usefulness of the enhanced indicators for policymakers, economic analysts and the public at large.
- JEL Code:
- C82,F10,F17,F30,F31,F40
- 25 June 2024
-
The ECB BlogDetails
- Subtitle:
- A digital euro would combine the convenience of digital payments with cash-like features. ECB Executive Board member Piero Cipollone explains how a digital euro would enhance Europeans’ freedom of choice when deciding how to pay.
- 24 June 2024
-
Working Paper Series - Issue No. 2949Details
- Abstract:
- This paper provides new survey evidence on firms’ inflation expectations in the euro area. Building on the ECB’s Survey on the Access to Finance of Enterprises (SAFE), we introduce consistent measurement of inflation expectations across countries and shed new light on the properties and causal effects of these expectations. We find considerable heterogeneity in firms’ inflation expectations and show that firms disagree about future inflation more than professional forecasters but less than households. We document that differences in firms’ demographics, firms’ choices and constraints, and cross-country macroeconomic environments account for most of the variation in inflation expectations by roughly equal shares. Using an RCT approach, we show that firms update their inflation expectations in a Bayesian manner. Moreover, they revise their plans regarding prices, wages, costs and employment in response to information treatments about current or future inflation.
- JEL Code:
- E20,E31,E52
- 24 June 2024
-
Statistics Paper Series - Issue No. 47Details
- Abstract:
- The Harmonised Index of Consumer Prices (HICP) currently only includes rentals for housing (paid by tenants) and auxiliary housing expenditures (paid by both tenants and owners). The inclusion of an item for owner-occupied housing (OOH) would be desirable for both representativeness and cross-country comparability. This paper reviews the potential options for including OOH in the HICP to derive a new inflation index. We discuss the conceptual and measurement issues involved. Additionally, we present our analytical calculations on the impact and economic properties of this index as compared to the HICP. We show that since 2011 the estimated impact of including OOH in HICP annual inflation, based on either the “net acquisition” approach or the “rental equivalence” approach, would have been within a band of between -1.2 and +0.4 percentage points. The net acquisition approach could result in bigger differences in future, should the fluctuations in the housing market cycles in the euro area be more pronounced and synchronised. The results should be interpreted keeping in mind that the period of observation is relatively short in relation to housing market cycles. In general, the empirical evidence suggests that including OOH based on the rental equivalence approach decreases the cyclicality of the new inflation index, while the net acquisition approach implies a small amplification of its cyclical properties compared to the HICP.
- JEL Code:
- C43,E31,E51
- 24 June 2024
-
Letters to MEPsRelated
- 24 June 2024
-
Digital Euro Preparation Phase - Progress Report
- 24 June 2024
-
Press releaseRelated
- 24 June 2024
-
Digital Euro Preparation Phase - Progress Report
- 24 June 2024
-
Digital Euro Preparation Phase - Progress ReportRelated
- 24 June 2024
- 24 June 2024
- 23 June 2024
-
SpeechDetails
- Subtitle:
- Slides by Isabel Schnabel, Member of the Executive Board of the ECB, on the occasion of the conferral of the Weltwirtschaftlicher Preis 2024 to her by the Kiel Institut für Weltwirtschaft
- 21 June 2024
-
Digital Euro Preparation Phase - Scheme Rulebook Development Group documentsAnnexes
- 21 June 2024
-
Digital Euro Preparation Phase - Scheme Rulebook Development Group documents
- 21 June 2024
-
Digital Euro Preparation Phase - Scheme Rulebook Development Group documentsAnnexes
- 21 June 2024
-
Digital Euro Preparation Phase - Scheme Rulebook Development Group documents
- 21 June 2024
-
Digital Euro Preparation Phase - Scheme Rulebook Development Group documentsAnnexes
- 21 June 2024
-
Digital Euro Preparation Phase - Scheme Rulebook Development Group documents
- 21 June 2024
-
Governing Council decisions - Other decisions
- 20 June 2024
-
Macroprudential Bulletin - Article - Issue No. 24Details
- Abstract:
- This article explores the benefits of a positive neutral rate for the countercyclical capital buffer (CCyB) and the conditions shaping the economic costs of its activation in a general equilibrium framework. The analysis shows that a gradual build-up of the buffer and favourable banking sector conditions (e.g. high profitability) limit these economic costs. Furthermore, a positive neutral CCyB rate ensures banking sector resilience in all phases of the financial cycle and improves macroprudential authorities’ ability to provide relief to the banking sector in the event of (potentially large) shocks, including those unrelated to the materialisation of domestic credit imbalances.
- JEL Code:
- C68,E61,G21,G28
- 20 June 2024
-
Economic Bulletin
- 20 June 2024
-
Economic Bulletin - BoxEconomic Bulletin Issue 4, 2024Details
- Abstract:
- This box investigates the factors underlying the growing, but still moderate, deterioration in bank credit quality against the backdrop of weak economic activity, rising interest rates and increases in the number of corporate bankruptcies. First, drawing on granular credit register data, we show that banks have actively rebalanced their loan portfolios towards safer assets, potentially curbing a build-up of credit risk on their balance sheets. Second, we explore the possibility that banks exercised greater caution in credit allocation as a result of regulatory considerations, and we assess the impact of bank balance sheet strength and resilience before the start of the recent monetary policy tightening cycle on their credit allocation strategies. Our findings suggest that regulatory pressures are relevant in the reallocation of credit from riskier to safer borrowers, while balance sheet strength and resilience prior to the tightening cycle did not significantly influence credit allocation patterns.
- JEL Code:
- E51,E52,G21,G35
- 20 June 2024
-
Economic Bulletin - BoxEconomic Bulletin Issue 4, 2024Details
- Abstract:
- This box describes liquidity conditions and the Eurosystem monetary policy operations during the first and second maintenance periods of 2024, from 31 January to 16 April 2024.
- JEL Code:
- E40,E52,E58
- 20 June 2024
-
Economic Bulletin - BoxEconomic Bulletin Issue 4, 2024Details
- Abstract:
- Standard indicators of profits in the economy derived from national accounts are based on GDP rather than on output and therefore do not consider the role of intermediate consumption. Differences between GDP-based and output-based profit indicators can be pronounced when there are exceptional developments in the cost of intermediate consumption, as recently observed. This box therefore proposes a new profit indicator based on total supply, which is a measure that corresponds more closely to output than GDP. Taken together, the GDP-based and total supply-based profit margin indicators suggest that in 2023 profits started to buffer the impact of labour cost developments on price pressures, but benefited from the decline in other costs.
- JEL Code:
- E31
- 20 June 2024
-
Economic Bulletin - BoxEconomic Bulletin Issue 4, 2024Details
- Abstract:
- This box evaluates perceived risks and sentiment in the euro area using evidence from corporate earnings calls. The results are particularly informative when assessing how firms perceive the repercussions of severe global shocks. Risk perceptions in the euro area remain higher than in other economies and than before the COVID-19 pandemic. Meanwhile, demand sentiment and supply sentiment have broadly normalised in recent quarters.
- JEL Code:
- D22,D81,E66
- 19 June 2024
-
Economic Bulletin - BoxEconomic Bulletin Issue 4, 2024Details
- Abstract:
- Growth has been notably weaker in the euro area than in the United States for decades. This box considers several factors that have contributed to the difference observed since the start of the pandemic, reflecting the fact that the euro area has seen less of a stimulus from private consumption, coupled with weaker labour productivity growth. The euro area has also felt a greater impact from the pandemic and Russia’s war against Ukraine. There is mixed evidence of the monetary policy impacts on activity in these two regions, albeit spillovers from the United States to the euro area appear larger than in the other direction. With regard to differences in fiscal policy, while accurate comparisons are difficult to draw, the fiscal policy impulse over 2020-23 was relatively similar in the two regions, whereas the overall level of the budget deficit was much larger in the United States.
- JEL Code:
- E21,E24,O47,E62,E52
- 19 June 2024
-
Economic Bulletin - ArticleEconomic Bulletin Issue 4, 2024Details
- Abstract:
- This article discusses the challenges for public finances arising from (i) demographic ageing, (ii) increases in defence expenditure, (iii) digitalisation and (iv) climate change. While these changes are likely to occur, the associated fiscal costs are difficult to estimate with precision. Nonetheless, as far as possible prudent fiscal policy should already be taking these into account.
- JEL Code:
- H68,J11,H56
- 19 June 2024
-
Balance of payments (monthly)
- 18 June 2024
-
SpeechDetails
- Subtitle:
- Keynote speech by Luis de Guindos, Vice-President of the ECB, at the Joint Conference of the European Commission and the ECB on European Financial Integration
- 18 June 2024
-
Weekly financial statementAnnexes
- 18 June 2024
-
Weekly financial statement - Commentary
- 18 June 2024
-
Working Paper Series - Issue No. 2948Details
- Abstract:
- This paper studies the pass-through from wages to producer prices using sectoral disaggregated data for the euro area. We find a positive and statistically significant wage-price pass-through that reaches 50% after three years, which differs across sectors. The wage-price pass-through in private servicesis significantly higher than in industry and takes longer before reaching its peak. While a higher labour intensity is a key component of the pass-through, our estimates indicate that differences in sectoral labour shares alone cannot explain the larger wage-price pass-through in private services compared to industry. Instead, the estimates hint at an important role for international competition in the domestic market for the tradeable sector. They also suggest that the sales destination matters: wage growth contributes to domestic inflation for goods but not to export inflation. Finally, we also provide evidence of an increase in the wage-price pass-through after 2020, particularly in private services.
- JEL Code:
- E24,E31
- 18 June 2024
-
Working Paper Series - Issue No. 2947Details
- Abstract:
- This paper studies how the Covid-19 pandemic and the extensive job retention support that accompanied it affected productivity in Europe. The focus is on the reallocation channel and productivity-enhancing reallocation of jobs, following Foster et al., 2016. An extensive micro-distributed analysis of firm-level data for 11 euro area countries is used. The unique firm-level datasets are constructed by merging balance-sheet and income-statement data with policy support data. The paper exploits variation in employment responsiveness to productivity over time, particularly examining the relationship between changes in employment responsiveness and the job retention support in 2020 and studying how well the support was targeted by firm productivity. Acknowledging limitations of a small set of countries covered and occasionally large confidence bounds around estimates, the findings suggest that (1) productivity-enhancing reallocation was weaker in the pandemic than in the Great Recession; (2) The countries that were more generous with job retention support and countries where more support was allocated to low-productivity firms showed weaker productivity-enhancing reallocation in 2020.
- JEL Code:
- D22,H25,J38,L29
- 18 June 2024
-
The ECB BlogDetails
- JEL Code:
- E58,E52,G12,G21
- Subtitle:
- With the reduction of the Eurosystem’s balance sheet, central bank liquidity is declining. As liquidity is unevenly distributed among banks, an effective redistribution and use of market funding are essential. This worked well so far, with limited recourse to Eurosystem’s refinancing operations.
- 18 June 2024
-
Economic Bulletin - BoxEconomic Bulletin Issue 4, 2024Details
- Abstract:
- Since the start of 2018 automotive production and exports in the euro area have both contracted by about 20%, while they have fared better in China, Japan, Korea and the United States. The current weakness is mostly a result of declining demand for combustion engines in the context of net zero emission targets and hesitancy to purchase hybrid and electric vehicles. Other factors, such as supply chain disruptions, adverse energy supply shocks and monetary tightening have also negatively contributed to the drop in automotive production. Despite intensified foreign competition, the euro area automotive industry has defended its global positioning by focusing on profitable market segments. A recovery can be expected in the medium term as adverse factors related to supply bottlenecks and tight financing conditions fade away. However, risks to the outlook are elevated. These are associated with the digital innovation gap vis-a-vis the United States and China as well as geopolitical tensions, which can disrupt supply chains.
- JEL Code:
- E3,F1,L62
- 18 June 2024
- 18 June 2024
-
Financial integration and structure in the euro areaAnnexes
- 18 June 2024
-
Financial integration and structure in the euro area
- 18 November 2024
-
Financial integration and structure in the euro area
- 18 June 2024
-
Financial integration and structure boxFinancial Integration and Structure in the Euro Area 2024Details
- Abstract:
- The European Union's FinTech industry has experienced rapid growth since the 2010’s, with a significant concentration of firms in major financial centers. This Box suggests that one of the reasons for the clustering of FinTechs close to financial centres may be easier access to equity finance. The analysis also shows that FinTechs outside financial centres compared to Fintechs that cluster in financial centers need to rely more on their performance as a signalling device to potential funding providers. Given the relevance of incubators and accelerators for early-stage development and funding of FinTech startups, the article points to the need to further investigate the role and effectiveness of institutional support schemes. It also underscores the need to advance on the EU’s capital markets union (CMU) agenda, in particular as regards policy efforts to grow European equity markets, in terms of both liquidity and depth.
- JEL Code:
- D22,G3,O30
- 18 June 2024
-
Financial integration and structure boxExamining the causes and consequences of the recent listing gap between the United States and EuropeFinancial Integration and Structure in the Euro Area 2024Details
- Abstract:
- In view of recent high-profile delistings from European stock exchanges and the widening gap in listings compared to the US, this Box sheds more light on the gap in listings between the United States and Europe. It examines the reasons behind the delisting activities of EU companies and identifies mergers and acquisitions as the key determinant over time, including in recent years. In addition, an examination of the trends of dual and US listings of European firms suggests a growing attractiveness of US markets for European firms. This suggests that policy measures may be needed to make EU listings more appealing, particularly for larger companies, by enhancing market depth and liquidity and possibly further consolidating European stock exchanges.
- JEL Code:
- G10,G15,G34
- 18 June 2024
-
Financial integration and structure boxFinancial Integration and Structure in the Euro Area 2024Details
- Abstract:
- The issuance of these temporary recovery instruments has renewed the discussion on the benefits of a common safe asset and their transformative potential for EU financial integration. Given that a common safe asset may foster financial integration in the euro area by facilitating diversification and de-risking banks’ sovereign portfolios, this box assesses the extent to which these newly issued EU bonds (i) are perceived by market participants as a common safe asset, and (ii) can facilitate diversification and affect banks’ sovereign portfolio composition.
- JEL Code:
- G12,G28,H63
- 18 June 2024
-
Financial integration and structure boxFinancial Integration and Structure in the Euro Area 2024Details
- Abstract:
- The box highlights the importance of cross-border bank lending to non-banks in the euro area. Comparing the domicile of euro area banks and borrowers, we estimate the scale of direct cross-border lending to represent 14.1% of euro area bank lending to non-banks which increases to 23% when we include indirect cross-border lending. Direct cross-border lending represents an important driver for enhancing banking market integration. It also constitutes an instrument to improve banks’ risk diversification and the resilience of borrowers’ funding structure. Finally, the box discusses the implications of different lending approaches, and sheds light on the sectors relying more on cross-border lending.
- JEL Code:
- G21,F02,F34,F36,O52.
- 18 June 2024
-
Financial integration and structure boxFinancial Integration and Structure in the Euro Area 2024Details
- Abstract:
- European banks often borrow in repo markets, pledging domestic government bonds as collateral. As there tends to be a positive relation between the default risk of a bank and the default risk of its home country, using domestic collateral comes at a cost. Using transaction-level data on short-term repurchase agreements (repo) and taking into account the direct effect of collateral and borrower risk, we show that borrowers pay a premium of 1.1 to 2.6 basis points when they use domestic collateral. Additionally, we show that borrowers internalize this premium when making their collateral choices.
- JEL Code:
- G21,G12,E43
- 18 June 2024
-
Financial integration and structure boxFinancial Integration and Structure in the Euro Area 2024Details
- Abstract:
- This box reassesses the patterns of euro area financial integration, adjusting for the role of financial centres in the euro area. Their special role involves acting as one of the euro area’s major hubs for (i) the investment fund industry, and (ii) securities issuance by affiliates of foreign companies. Looking through these dual roles of euro area financial centres provides a nuanced picture of euro area financial integration and portfolio exposures. The restatements methodology reveals three main findings namely that (i) the euro area as a whole is less financially integrated with the rest of the world (ii) at the country level Luxembourg and Ireland act as a source of portfolio diversification for the other euro area countries and (iii) the evolution of equity home bias in the euro area looks very similar to that of the United States since 1995, while euro area bond home bias declined significantly.
- JEL Code:
- F3,F4,G2,G3,H26
- 18 June 2024
-
Financial integration and structure boxFinancial Integration and Structure in the Euro Area 2024Details
- Abstract:
- The United Kingdom’s decision to leave the EU impacted the EU’s financial infrastructure, in particular those financial market segments heavily reliant on UK clearing services. This box analyses how the market shares of euro area CCPs offering similar clearing services to their UK competitors have evolved since Brexit. Although the market share of euro area CCPs has increased over time, the over-reliance of domestic market participants on non-euro area clearing services persists. This could have serious implications for the financial stability of the EU, especially under stressed market conditions. Reducing the reliance of European markets on third countries for the provision of critical clearing services remains a priority for EU policymakers from a financial stability perspective, together with building well-integrated, resilient clearing markets in the EU.
- JEL Code:
- G15,G23,G28,F36
- 18 June 2024
-
Financial integration and structure boxFinancial Integration and Structure in the Euro Area 2024Details
- Abstract:
- Substantial green and digital investments will be needed to reach the targets set for 2030 and beyond under the Green Deal and the Digital Compass. The EU faces a large gap in funding for these investment needs, raising the question of how private capital can be best mobilised to bridge the gap. This box presents an overview of estimates of green and digital investment needs and discusses some of the challenges to be met, in particular in terms of funding needs
- JEL Code:
- Q43,Q50,O30,E22,H54
- 17 June 2024
-
Working Paper Series - Issue No. 2946Details
- Abstract:
- We examine the extent to which environmental regulation affects innovation and which policy types provide the strongest incentives to innovate. Using a local projection framework, we estimate the regulatory impact on patenting activity over a five-year horizon. As a proxy for environmental policy exposure, we estimate firm-level greenhouse gas emissions using a machine learning algorithm. At the country-level, policy tightening is largely associated with no statistically significant change in environmental technology innovation. At the firm-level, however, environmental policy tightening leads to higher innovation activity in technologies mitigating climate change, while the effect on innovation in other technologies is muted. This suggests that environmental regulation does not lead to a crowding-out of non-clean innovations. The policy type matters, as increasing the stringency of technology support policies and non-market based policies leads to increases in clean technology patenting, while we do not find a statistically significant impact of market-based policies.
- JEL Code:
- O44,Q52,Q58
- 17 June 2024
-
Economic Bulletin - ArticleEconomic Bulletin Issue 4, 2024Details
- Abstract:
- This article examines recent sectoral developments in the euro area and their near-term implications for the business cycle. After a brief review of the existing literature, it presents new evidence for the euro area. It first uses a simple aggregate measure of cross-sectoral shifts in activity to assess the short-term impact of these shifts on the business cycle. It then explores the leading-indicator properties of sectoral developments as regards aggregate activity and explains the correlation between these properties and the position of sectors within the production structure of the economy. Overall, the results of this article point to moderate momentum in economic activity in the euro area in the near term.
- JEL Code:
- E23,E27,E32
- 14 June 2024
-
SpeechDetails
- Subtitle:
- Speech by Christine Lagarde, President of the ECB, at the 30th Dubrovnik Economic Conference
- 14 June 2024
-
Legal Working Paper Series - Issue No. 22
- 13 June 2024
- 13 June 2024
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The ECB BlogDetails
- JEL Code:
- E42,E49,E59,G29
- Subtitle:
- Many people appreciate privacy when paying, and want their data protected. Current electronic means of payment are not optimal in this regard. We are designing the digital euro to be the most private electronic payment option. The ECB Blog explains.
- 12 June 2024
-
SpeechDetails
- Subtitle:
- Speech by Isabel Schnabel, Member of the Executive Board of the ECB, at the Finance Committee of the German Bundestag in Berlin
- 12 June 2024
-
Working Paper Series - Issue No. 2945Details
- Abstract:
- We investigate the impact of expectations about future climate policy on investment decisions of fossil fuel firms. Our empirical analysis reveals that firms with greater exposure to climate change significantly increased their investment in response to the Paris Agreement, in contrast to firms with lower exposure. Importantly, investment was directed towards traditional activities in the fossil fuel industry. By contrast, there are no indications that firms invested to transition towards renewable energy sources nor in making production less carbon-intensive. Our findings contribute to the ongoing discussion about the potential adverse effects of delays in the implementation of climate regulation.
- JEL Code:
- G31,G38,Q58
- 12 June 2024
-
The ECB BlogDetails
- JEL Code:
- E42,F02,F01,F31,F33
- Subtitle:
- More reforms are needed if the euro is to maintain and strengthen its role amid geopolitical shifts. Europe needs to further develop the infrastructure for making cross-border payments in euro with key partners.
- 12 June 2024
-
Press releaseRelated
- 12 June 2024
-
The international role of the euro
- 12 June 2024
-
The international role of the euroAnnexes
- 12 June 2024
-
The international role of the euro - Statistical annex
Related- 12 June 2024
- 11 June 2024
-
SpeechDetails
- Subtitle:
- Dinner speech by Frank Elderson, Member of the Executive Board of the ECB and Vice-Chair of the Supervisory Board of the ECB, at the 2024 Annual ECB Banking Supervision Research Conference
- 11 June 2024
-
Weekly financial statementAnnexes
- 11 June 2024
-
Weekly financial statement - Commentary
- 11 June 2024
-
SpeechDetails
- Subtitle:
- Speech by Philip R. Lane, Member of the Executive Board of the ECB, at the Banking & Payments Federation Ireland (BPFI) National Banking Conference
Annexes- 11 June 2024
- 11 June 2024
-
InterviewDetails
- Subtitle:
- Interview with Christine Lagarde, President of the ECB, conducted by Andrés Stumpf, Stefan Reccius, Isabella Bufacchi, Guillaume Benoit and Alexandre Counis in Paris on 7 June 2024
- 10 June 2024
-
Working Paper Series - Issue No. 2944Details
- Abstract:
- We use outages as natural experiments to study sovereign bond market functioning. When the euro area futures market goes down, trading activity on the cash market declines, liquidity evaporates, and transaction prices deviate from fundamental values. Tracing back this macrolevel market breakdown to the micro-level, we show that particularly dealers withdraw from the cash market during outages. While most of their remaining trades remain fairly priced, dealer’s capacity to intermediate trades on the cash market is reduced, forcing more clients to trade directly with each other, leading to substantial mispricing. Lastly, outages on cash trading venues barely affect the futures market, suggesting that price formation and liquidity provision is a one-way street, and outages on the US and euro area futures market barely affect each other, in stark contrast to the significant price spillovers. Our results reveal the trade-offs between a (de)centralized market structure, they support cross-asset learning models to explain the link between liquidity and arbitrage, and they demonstrate how financial intermediaries can impose important limits to arbitrage.
- JEL Code:
- G12,G14,G23
- 10 June 2024
-
Survey of Monetary Analysts - Aggregate results
- 9 June 2024
-
Occasional Paper Series - Issue No. 351Details
- Abstract:
- The European Union is aiming to foster digital transformation in all sectors by 2030. It has pioneered cross-sectoral legislation on artificial intelligence, cloud computing services and crypto-assets for this purpose. Yet compared with the work done on ESG, the prospective banking regulation regime has still to articulate more purposefully how the industry should manage the risks from digital trends and how supervisors should assess them. This paper discusses digital innovation in the banking sector in the context of the academic literature on financial innovation and non-banks. It also considers how to foster a risk-based Pillar 2 prudential framework, as well as market discipline through harmonised Pillar 3 disclosures. The paper concludes that these latter two propositions can help reconcile the challenges stemming from the short-term horizon applied in prudential assessment and the longer-term horizon over which digital innovation will take place in the banking sector.
- 8 June 2024
-
The ECB BlogDetails
- JEL Code:
- E43,E50,E52,E60,E61
- Subtitle:
- The ECB has cut interest rates. President Christine Lagarde explains why and sets out what still needs to be done to bring inflation back to 2% over the medium term.
- 7 June 2024
-
SpeechDetails
- Subtitle:
- Speech by Christine Lagarde, President of the ECB, at the Maurice Allais Foundation
- 7 June 2024
-
Press release
- 7 June 2024
-
TARGET Annual Report
- 7 June 2024
-
Euro area balance of payments and international investment position statistics - Quality reportAnnexes
- 7 June 2024
- 7 June 2024
-
Occasional Paper Series - Issue No. 350Details
- Abstract:
- The activities of multinational enterprises (MNEs) have become an increasingly important feature of the euro area economy, affecting output, trade and financial linkages. MNEs contribute to domestic output by maintaining large production facilities, offering high-paid jobs, bringing in new technologies and generating tax revenues. Following statistical changes implemented in 2015 to better capture the increasing importance of intangible investment, the economic impact of MNE activities has become much more evident in measures of intellectual property product (IPP) investment and external IPP trade flows. MNE activities, which often entail large and instantaneous transfers of IPP, are frequently highly volatile and can blur real-time assessment – and forecasting – of the business cycle, the current account and the capital stock in the euro area. Focusing on Ireland, given the strong prevalence of MNE activities in that economy and their importance for the euro area aggregate, this paper assesses the usefulness of the “modified” series for Irish non-construction investment and services imports. Using the modified series would provide a more accurate picture of the domestic dynamics of the Irish economy and enhance real-time assessment of the euro area business cycle, current account and capital stock. This paper brings insights into the unwinding of IPP shocks, which is a more straightforward exercise than seeking to anticipate the shocks themselves. The conclusions of this work underline the urgent need for more granular and internationally harmonised data on MNE activities to gain a clearer understanding of the dynamics of IPP operations and the implications for both short and long-term macroeconomic developments.
- JEL Code:
- E22,F23,F62
- 7 June 2024
-
SpeechDetails
- Subtitle:
- Speech by Isabel Schnabel, Member of the Executive Board of the ECB, at the Federal Ministry of Finance in Berlin
Annexes- 7 June 2024
- 7 June 2024
-
Economic Bulletin - BoxEconomic Bulletin Issue 4, 2024Details
- Abstract:
- Since the end of the pandemic, employment dynamics in the euro area have been significantly stronger than economic activity. The fall in real wages has been key in supporting employment growth following the energy crisis in Europe: real wage growth has been lower than productivity growth, bolstering job creation and leading to labour hoarding. Looking through the lens of an empirical model that explains deviations from historical regularities, we find that a key factor which has helped employment growth decouple from output dynamics is a substitution effect across production inputs in favour of labour. Employment dynamics have also been sustained by demand-side factors, including fiscal policy, as well as by labour market-specific effects related to fewer hours worked per worker. Given the temporary nature of these factors, much of the recent fall in productivity – measured as output per worker – is likely to be reversed in the coming years.
- JEL Code:
- E24,J21
- 7 June 2024
-
Economic Bulletin - BoxEconomic Bulletin Issue 4, 2024Details
- Abstract:
- Why are there more firms able to hoard labour than before the pandemic? Firm-level estimates suggest that a 1 percentage point increase in the profit margin of a firm raises the likelihood of that firm hoarding labour by 0.2 percentage points. This suggests that the higher profit margins of firms in recent years have, on average, improved their ability to hoard labour when their own economic outlook has worsened. As a result, a tightening of profit margins may have implications for employment growth.
- JEL Code:
- E24,J23
- 6 June 2024
- 6 June 2024
-
Macroeconomic projections for the euro areaAnnexes
- 14 June 2024
- 20 June 2024
- 6 June 2024
-
Combined monetary policy decisions and statementRelated
- 6 June 2024
-
Monetary policy statement
- 6 June 2024
-
Monetary policy decision
- 6 June 2024
-
Monetary policy statementDetails
- Subtitle:
- Christine Lagarde, President of the ECB, Luis de Guindos, Vice-President of the ECB, Frankfurt am Main, 6 June 2024
Related- 6 June 2024
-
Combined monetary policy decisions and statement
- 6 June 2024
-
Monetary policy decision
- 6 June 2024
-
Monetary policy decisionRelated
- 6 June 2024
-
Combined monetary policy decisions and statement
- 5 June 2024
-
Press release
- 5 June 2024
-
MFI interest rate statistics
- 4 June 2024
-
Disaggregated financial statement
- 4 June 2024
-
Weekly financial statementAnnexes
- 4 June 2024
-
Weekly financial statement - Commentary
- 29 May 2024
- 29 May 2024
-
Monetary developments in the euro areaAnnexes
- 28 May 2024
-
Weekly financial statementAnnexes
- 28 May 2024
-
Weekly financial statement - Commentary
- 28 May 2024
-
Press release
- 28 May 2024
-
Consumer Expectation Survey
- 28 May 2024
-
Consumer Expectation Survey
- 28 May 2024
-
Consumer Expectation Survey
- 28 May 2024
-
Consumer Expectation Survey
- 28 May 2024
-
SpeechDetails
- Subtitle:
- Speech by Isabel Schnabel, Member of the Executive Board of the ECB, at the 2024 BOJ-IMES Conference on “Price Dynamics and Monetary Policy Challenges: Lessons Learned and Going Forward”
Annexes- 28 May 2024
- 27 May 2024
-
SpeechDetails
- Subtitle:
- Speech by Philip R. Lane, Member of the Executive Board of the ECB, at the Institute of International and European Affairs, Dublin
- 27 May 2024
-
Working Paper Series - Issue No. 2943Details
- Abstract:
- Amid the growing financial vulnerabilities posed by climate change, we investigate macroprudential capital buffers to mitigate systemic risks and increase the resilience of the banking sector. Leveraging granular data and state-of-the-art stress testing methods, we quantify potential bank losses attributed to climate-related transition risks. Focusing on short-term transition scenarios, we document a significant variance among banks in their risk exposure, with the most exposed institutions being those characterized by lower excess capital. Subsequently, we introduce a methodological framework for tailoring bank-specific buffer requirements to cover these losses, offering macroprudential authorities a practical method for calibrating climate-related macroprudential capital buffers, complementing microprudential policies. While we focus our application on transition risks, the framework can be extended to capture all climate risks in general. The study demonstrates the potential of macroprudential capital buffers to mitigate potential climate-related losses and contributes to the understanding of the appropriate prudential policy response to these challenges.
- JEL Code:
- E61,G21,G28,Q54
- 27 May 2024
-
Research Bulletin - Issue No. 119Details
- Abstract:
- Households’ willingness to take on risks has clear implications for the transmission of financial shocks, both in the long run and over the business cycle. This article introduces a newly published research dataset from the ECB’s Consumer Expectations Survey (CES) and summarises insights these data provide into household risk-taking. In particular, it examines how an increase in wealth affects a household’s decision on whether or not to invest in the stock market. The evidence suggests that all but the wealthiest households have a substantial aversion to investing in the stock market. Other reasons for avoiding stocks likely include information processing costs, as well as beliefs about stock prices, lack of trust, inertia and other behavioural biases.
- JEL Code:
- D14,G11,G51
- 27 May 2024
-
InterviewDetails
- Subtitle:
- Interview with Philip R. Lane, Member of the Executive Board of the ECB, conducted by Martin Arnold on 24 May 2024
- 26 May 2024
-
SpeechDetails
- Subtitle:
- Speech by Piero Cipollone, Member of the Executive Board of the ECB, at the Festival dell’ Economia di Trento
- 24 May 2024
-
InterviewDetails
- Subtitle:
- Interview with Isabel Schnabel, Member of the Executive Board of the ECB, conducted by Steffen Clement on 16 May 2024
- 24 May 2024
-
Occasional Paper Series - Issue No. 349Details
- Abstract:
- This paper reviews the main arguments underpinning the reform of the EU’s fiscal framework, which has culminated in the adoption by the EU legislators of a revised set of rules for the European economic governance including the Stability and Growth Pact (SGP). It takes a chronological approach by first discussing the Commission’s legislative proposals of April 2023 against the pre-reform set of fiscal rules, before assessing the final political agreement which has materialised in the revised set of rules. In view of the multi-dimensional reform outcome, it is argued that the success of the reform of the fiscal framework will ultimately depend on its future implementation by the Commission and the Council. Combining the reform of the fiscal rules with better fiscal coordination through the establishment of a permanent euro area fiscal capacity was not proposed in the context of this reform. This paper argues that completing the architecture of Economic and Monetary Union (EMU) is an important missing element and should remain a policy priority.
- JEL Code:
- H6,H11,H50
- 23 May 2024
-
The ECB BlogDetails
- JEL Code:
- E20,E24,E31,E37
- Subtitle:
- Negotiated wage growth in the euro area increased in the first quarter of 2024. This post on The ECB Blog illustrates how the ECB wage tracker can help to put latest developments in negotiated wage growth into perspective.
- 23 May 2024
-
InterviewDetails
- Subtitle:
- Interview with Luis de Guindos, Vice-President of the ECB, conducted by Dietmar Mascher and Alexander Zens
- 22 May 2024
-
The ECB BlogDetails
- JEL Code:
- E40,E47,E50,E52,E58
- Subtitle:
- Why do central banks mostly give their guidance for future monetary policy in qualitative terms rather than providing a numerical formula? The ECB Blog takes a look through the lens of the “ABCs” of the ECB’s qualitative reaction function.
- 21 May 2024
-
Weekly financial statementAnnexes
- 21 May 2024
-
Weekly financial statement - Commentary
- 21 May 2024
-
Balance of payments (monthly)
- 21 May 2024
-
Survey of Monetary Analysts
- 17 May 2024
-
Digital Euro Preparation Phase document
- 17 May 2024
-
T2S Annual Report
- 17 May 2024
-
Working Paper Series - Issue No. 2942Details
- Abstract:
- While global supply chains have recently gained attention in the context of the Covid-related crisis as well as the war in Ukraine, their role in transmitting and amplifying climate-related physical risks across countries has received surprisingly little attention. To address this shortcoming, this paper for the first time combines country-level GDP losses due to climate-related physical risks with a global Input-Output model. More specifically, climate-related GDP-at-risk data are used to quantify the potential direct impact of physical risks on GDP at the country or regional level. This direct impact on GDP is then used to shock a global Input-Output (IO) model so that the propagation of the initial shock to country-sectors around the world becomes observable. The findings suggest that direct GDP loss estimates can severely underestimate the ultimate impact of physical risk because trade can lead to losses that are up to 30 times higher in the EA than what looking at the direct impacts would suggest. However, trade can also mitigate losses if substitutability across country-sectors is possible. Future research should (i) develop more granular, holistic, and forward-looking global physical risk data and (ii) examine more closely the role of both partially substitutable outputs, and critical outputs that are less substitutable or not substitutable at all, such as in the food sector.
- JEL Code:
- E01,Q54,Q56,F18
- 17 May 2024
-
InterviewDetails
- Subtitle:
- Interview with Isabel Schnabel, Member of the Executive Board of the ECB, conducted by Shogo Akagawa and Takerou Minami on 13 May 2024
- 16 May 2024
- 16 May 2024
-
Press releaseRelated
- 16 May 2024
-
Financial Stability Review
- 16 May 2024
-
Financial Stability Review - BoxFinancial Stability Review Issue 1, 2024Details
- Abstract:
- Recent stress episodes have shown how leverage in the non-bank financial intermediation (NBFI) sector can be a source of systemic risk and amplify stress in the wider financial system. Prominent examples of leverage-related risk in the NBFI sector include the role of leveraged hedge funds in the US Treasury market in March 2020, liability-driven investment funds in UK gilt markets in September 2022 and the failure of Archegos Capital Management in March 2021. In response to these events, policymakers around the world have launched a range of initiatives to contain risks from leverage in the NBFI sector more broadly. A key takeaway from these recent experiences and policy initiatives is that no single tool can be uniformly applied to address risks stemming from NBFI leverage. An effective policy response requires a broad range of tools to be made available, which should be appropriately tailored to the specific circumstances and can serve as complements to each other. Given the significant cross-border and cross-sector dimension of these risks, close coordination and cooperation between various authorities is essential, ensuring that risks are addressed from a system-wide perspective.
- JEL Code:
- G01,G10,G15,G23,G28
- 16 May 2024
-
Financial Stability Review - BoxAssessing the liquidity preparedness of investment funds to meet margin calls in derivatives marketsFinancial Stability Review Issue 1, 2024Details
- Abstract:
- Recent episodes of liquidity stress highlight the need to monitor funds’ liquidity preparedness to meet margin calls on derivatives. This box proposes four indicators of fund-level liquidity preparedness to meet margin calls to identify potential vulnerabilities that may require higher cash buffers and/or more diversified high-quality liquid assets (HQLA). Both the stock of initial margin posted and the flow of initial and variation margin are examined, offering complementary insights. The first set of indicators considers the ratios between the volumes of margin stock or flow over cash holdings, while the second set replaces cash with HQLA. The results highlight how cash alone may not be enough to cover margin calls, thus emphasising the importance of funds relying on diverse and reliable sources of liquidity and collateral. Moreover, existing vulnerabilities in the fund sector can lead to procyclical behaviours, amplifying market-wide stress and spreading to other market participants.
- JEL Code:
- G01,G10,G15,G23
- 16 May 2024
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Financial Stability Review - BoxFinancial Stability Review Issue 1, 2024Details
- Abstract:
- Around 20% of euro area bank funding is provided by the non-bank financial intermediation (NBFI) sector, mainly via market-based instruments such as bonds and repurchase agreements. The reliance on NBFI funding varies in line with banks’ business models, with some banks obtaining about a third of their funds from the NBFI sector. NBFI entities also display a strong preference for some types of funding instruments, suggesting limited substitutability across sectors and financing sources. Focusing on the repo market, we test funding substitution by euro area banks across sectors when facing a reduction in repo funds. Banks can only replace about 25% of the outflows after repo funding falls. When the outflow comes from an investment fund, banks face an even larger reduction in repo funds. These results and some recent episodes of liquidity turmoil in the NBFI sector suggest that more widespread shocks could affect the ability of banks to secure funding.
- JEL Code:
- G21,G23
- 16 May 2024
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Financial Stability Review - BoxFinancial stability risks from basis trades in the US Treasury and euro area government bond marketsFinancial Stability Review Issue 1, 2024Details
- Abstract:
- Basis trades are arbitrage strategies which exploit mispricing between the spot price and the futures price of a given security. They improve market functioning but are also subject to funding and liquidity risks, especially when excessively leveraged. Hedge funds have built up leveraged exposures in the US Treasury market, giving rise to financial stability concerns. While risks are partly mitigated by already elevated margin requirements in the futures market, disruptions in the repo market could still force some entities to unwind their basis trades. Given the role of US Treasury bonds as global risk-free assets, dislocations resulting from widespread unwinding of basis trades could spill over into other jurisdictions and asset classes. Furthermore, a build-up of hedge fund exposures has also been observed in the euro area government bond market, but the size of basis trade activity seems contained.
- JEL Code:
- G10,G11,G12,G13,G15
- 16 May 2024
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Financial Stability Review - BoxFinancial Stability Review Issue 1, 2024Details
- Abstract:
- Implied equity market volatility has been low in recent quarters, in both absolute and relative terms, despite tighter monetary policy, rising geopolitical tensions and a balance of risks to economic growth tilted to the downside. This box discusses several factors that may have contributed to the low levels of implied equity market volatility. It describes how progress in bringing inflation down without a deep economic contraction has supported investor optimism and highlights how increasingly common short volatility strategies may also have suppressed implied equity market volatility. The box then examines the divergence of implied equity market volatility from the implied volatility in interest rate markets and discusses possible implications for financial stability. Elevated implied interest rate market volatility could point to downside macro-financial risks that seem not fully priced in by equity investors. Subdued implied equity market volatility – despite broader uncertainties – might suggest an underestimation of risks in equity markets and excessive risk-taking. Consequently, adverse economic surprises or geopolitical shocks could lead to significant market corrections. Large exposures in volatility instruments could, in turn, increase the likelihood of a disorderly correction.
- JEL Code:
- G10,G11,G12,G15
- 16 May 2024
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Financial Stability Review - BoxFinancial Stability Review Issue 1, 2024Details
- Abstract:
- The rapid increase in interest rates observed over the last few years could weaken the ability of firms to service and roll over their debt and, consequently, worsen the outlook for bank asset quality. This box combines firm-level balance sheet data with loan-level data to assess the joint impact of resilient post-pandemic profitability and higher financing costs on the debt servicing capacity of euro area firms. The interest burdens of euro area firms are estimated to have increased only slightly, as higher revenues largely offset their higher interest payments. The impact of higher debt service costs has been disproportionately strong in the real estate sector, which has faced weakened demand, as well as in countries where floating-rate lending is prevalent. Some vulnerable firms may benefit from refinancing in a more favourable environment if market rates fall as expected. Banks should recognise credit distress promptly and offer viable solutions to firms which struggle to service their debt. However, even among firms with low interest coverage ratios, the majority of bank loans have not been restructured and remain performing..
- JEL Code:
- G32,G33
- 16 May 2024
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Financial Stability Review - ArticleFinancial Stability Review Issue 1, 2024Details
- Abstract:
- Euro area private markets have grown significantly in recent years, providing alternative funding sources for companies and diversification benefits for investors. While private markets are currently small relative to public markets and bank lending in the euro area, continued strong growth, financial innovation and opaqueness in private markets could contribute to financial stability risks. Adverse economic shocks could result in rising defaults, valuation corrections and losses for private funds and their investors. Additionally, such shocks may be exacerbated by multiple layers of leverage at company, fund and investor level, or by liquidity mismatches for some open-ended private funds. For banks, risks could arise from lending exposures to these markets, as well as from rising competition with private funds, which could incentivise lower underwriting and credit standards.
- JEL Code:
- G20,G21,G23,G24,G30,G32
- 16 May 2024
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Financial Stability ReviewAnnexes
- 16 May 2024
Related- 16 May 2024
- 15 May 2024
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Working Paper Series - Issue No. 2941Details
- Abstract:
- This paper proposes an operational approach to stress testing, allowing one to assess the banking sector’s vulnerability in multiple plausible macro-financial scenarios. The approach helps identify macro-financial risk factors of particular relevance for the banking system and individual banks and searches for scenarios that could push them towards their worst outcomes. We demonstrate this concept using a macroprudential stress testing model for the euro area. By doing so, we show how multiple-scenario stress testing can complement single-scenario stress tests, aid in scenario design, and evaluate risks in the banking system. We also show how stress tests and scenarios can be optimized to accommodate different mandates and instruments of supervisory and macroprudential agencies.
- JEL Code:
- E37,E58,G21,G28
- 15 May 2024
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The ECB BlogDetails
- JEL Code:
- E51,E43,G21
- Subtitle:
- Despite rising interest rates, more consumers are applying for loans. This demand comes mainly from households with lower income. The ECB Blog takes a closer look into credit applications and how they affect banks’ credit standards and credit issuance to households.
- 15 May 2024
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Financial Stability Review - ArticleFinancial Stability Review Issue 1, 2024Details
- Abstract:
- The emergence of generative artificial intelligence (AI) tools represents a significant technological leap forward, with the potential to have a substantial impact on the financial system. Conceptually, AI brings both benefits and risks to the financial system. Practically, the overall impact will depend on how the challenges related to data, model development and deployment are addressed – both at the level of financial institutions and for the financial system as a whole. If new AI tools are used widely in the financial system and AI suppliers are concentrated, operational risk (including cyber risk), market concentration and too-big-to-fail externalities may increase. Furthermore, widespread AI adoption may harbour the potential for increased herding behaviour and market correlation. Should concerns arise that cannot be tackled by the current regulatory framework, targeted initiatives may need to be considered.
- JEL Code:
- G01,G10,G14,G20,G41
- 14 May 2024
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Occasional Paper Series - Issue No. 348Details
- Abstract:
- This paper provides an overview of stress-testing methodologies in Europe, with a focus on the advancements made by the European Central Bank’s Financial Stability Committee Working Group on Stress Testing (WGST). Over a four-year period, the WGST played a pivotal role in refining stress-testing practices, promoting collaboration among central banks and supervisory authorities and addressing challenges in the evolving financial landscape. The paper discusses the development and application of various stress-testing models, including top-down models, macro-micro models and system-wide models. It highlights the integration of new datasets and model validation efforts as well as the expanded use of stress-testing methodologies in risk and policy evaluation and in communication. The collaborative efforts of the WGST have demystified stress-testing methodologies and fostered trust among stakeholders. The paper concludes by outlining the future agenda for continued improvements in stress-testing practices.
- JEL Code:
- G21,G28,C58,G01,G18
- 14 May 2024
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Discussion Paper Series - Issue No. 24Details
- Abstract:
- This paper discusses the recent wave of research that has emphasized the importance of measures of consumers’ inflation expectations. In contrast to other measures of expected inflation, such as for experts or financial market participants, consumers’ inflation expectations capture the broader distribution of societal beliefs about inflation. This research has revealed very significant deviations from traditional assumptions about rationality in consumers’ expectations formation. However, households do act on their beliefs about inflation, though in heterogeneous ways that can depart from the predictions of conventional economic models. Recent euro area experiences highlight the importance of tracking the degree of anchoring in consumers’ inflation expectations in a way that considers their inherent complexity, heterogeneity, and subjectivity. On average, consumers’ medium and longer-term expectations deviate noticeably in levels from central bank targets and, in contrast with expert expectations, often co-move more closely with shorter-term inflation news. By stepping up their engagement with the wider public, central banks may be able to influence expectations by building up greater knowledge and trust and thereby support more effective monetary transmission. Communication efforts need to be persistent because central banks must compete with many other demands on consumers’ attention.
- JEL Code:
- E52,E58,E31
- 14 May 2024
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Weekly financial statementAnnexes
- 14 May 2024
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Weekly financial statement - Commentary
- 14 May 2024
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SpeechDetails
- Subtitle:
- Speech by Isabel Schnabel, Member of the Executive Board of the ECB, at the conference “Setting the course for competitiveness and growth” at the German Chancellery, Berlin
Annexes- 14 May 2024
- 14 May 2024
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Financial Stability Review - ArticleFinancial Stability Review Issue 1, 2024Details
- Abstract:
- Geopolitical risk can be a threat to financial stability and the global economy. It can adversely affect the economy and financial markets and consequently have a negative impact on the funding, lending, solvency, asset quality and profitability of banks and non-banks alike. Recent history suggests that adverse geopolitical events alone are unlikely to cause a systemic crisis, although they may act as a trigger for systemic distress if they interact with pre-existing vulnerabilities. Looking ahead, policy authorities need to monitor geopolitical risk and assess its possible consequences for financial stability. Financial institutions should apply a combination of sound risk management and business diversification to address geopolitical risk.
- JEL Code:
- G1,G21,G23
- 13 May 2024
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Working Paper Series - Issue No. 2940Details
- Abstract:
- This study re-assesses the validity of the quantity theory of money (QTM) for the very long sample, 1870 to 2020, for 18 industrial countries using the dataset from Jordà et al. (2017). It considers structural changes in the economic and financial sectors and changes in monetary policy rameworks. Three findings are presented. First, the results from panel cointegration tests show that the long-run relationship between excess money growth and inflation holds if longer runs of data are used. Second, panel regressions confirm the presence of long and variable lags in the monetary policy transmission, as predicted by Milton Friedman. For the full sample, the average speed of adjustment from excess money growth to inflation in industrial countries was about two years amid heterogeneity across time and countries. Third, the results show that over recent decades, structural change - coinciding with the Great Moderation and, in part, reflecting changes in payment technologies - has led to a collapse of QTM.
- JEL Code:
- B16,B23,E40,E50,N1
- 10 May 2024
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Governing Council decisions - Other decisions
- 10 May 2024
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Monetary policy accountRelated
- 11 April 2024
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Monetary policy decision
- 10 May 2024
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Working Paper Series - Issue No. 2939Details
- Abstract:
- In financial crises, the premium on liquid assets such as US Treasuries increases alongside credit spreads. This paper explains the link between the liquidity premium and spreads. We present a theory of endogenous bank fragility arising from a coordination friction among bank creditors. The theory’s implications reduce to a single constraint on banks, which is embedded in a quantitative macroeconomic model to investigate the transmission of shocks to spreads and economic activity. Shocks that reduce bank net worth exacerbate the coordination friction. In response, banks lend less and demand more liquid assets. This drives up both credit spreads and the liquidity premium. By mitigating the coordination friction, expansions of public liquidity reduce spreads and boost the economy. Empirically, we identify high-frequency exogenous variation in liquidity by exploiting the time lag between auction and issuance of US Treasuries. We find a causal effect on spreads in line with the calibrated model.
- JEL Code:
- E41,E44,E51,G01,G21
- 10 May 2024
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Occasional Paper Series - Issue No. 347Details
- Abstract:
- This paper presents the updated macroprudential stress test for the euro area banking system, comprising around 100 of the largest euro area credit institutions across 19 countries. The approach involves modelling banks’ reactions to changing economic conditions. It also examines the effects of adverse scenarios as defined for the European Banking Authority’s 2023 stress test on economies and the financial system as a whole by acknowledging a broad set of interactions and interdependencies between banks, other market participants and the real economy. Our results highlight the resilience of the euro area banking system and the important role banks’ adjustments play in the propagation of shocks to the financial sector and real economy.
- JEL Code:
- C30,C53,C54,E52
- 10 May 2024
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SpeechDetails
- Subtitle:
- Slides by Piero Cipollone, Member of the Executive Board of the ECB, at a meeting of Central Bank Governors of the Center for Latin American Monetary Studies (CEMLA) in Madrid
- 9 May 2024
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SpeechDetails
- Subtitle:
- Slides by Piero Cipollone, Member of the Executive Board of the ECB, at a seminar organised by the Italian Companies and Exchange Commission (CONSOB) in Rome
- 8 May 2024
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Working Paper Series - Issue No. 2938Details
- Abstract:
- Large-Scale Asset Purchases can impact the price of securities directly, when securities are targeted by the central bank, or indirectly through portfolio re-balancing of private investors. We quantify both the direct and the portfolio re-balancing impact, emphasizing the role of investor heterogeneity. We use proprietary security-level data on asset holdings of different investors. We measure the direct impact on security level, finding that it is smaller for securities predominantly held by more price-elastic investors, funds and banks. Comparing a security at the 90th percentile of the investor elasticity distribution to a security at the 10th percentile, the price impact is only two-thirds as large. To assess the portfolio re-balancing effects, we construct a novel shift-share instrument to measure investors’ quasi-exogenous exposure to central bank purchases, based on investors’ holdings of eligible securities before the QE program was announced. We show that funds and banks sell eligible securities to the central bank and re-balance their portfolios towards ineligible securities, with investors ex-ante more exposed to central bank purchases re-balancing more. Using detailed holdings data of mutual funds, we estimate that for each euro sold to the central bank, the average fund allocates 88 cents to ineligible assets and 12 cents to other eligible assets that the central bank does not buy in that time period. The price of ineligible securities held by more exposed funds increases compared to those held by less exposed funds, underscoring the portfolio re-balancing channel at work.
- JEL Code:
- E52,E58,G11,G12,G23
- 8 May 2024
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Working Paper Series - Issue No. 2937Details
- Abstract:
- We construct a novel measure of bank performance, investigate its determinants, and show that it affects bank resilience, lending behaviour and real outcomes. Using confidential and granular data, we measure performance against a market-based benchmark portfolio that mimics individual banks’ interest rate and credit risk exposure. From 2015 to mid-2022, euro area banks underperformed market benchmarks by around e160 billion per year, amid substantial heterogeneity. Structural factors, such as cost inefficiencies, rather than monetary or regulatory measures, were the main driver of bank underperformance. We also show that higher edge banks are less reliant on government support measures and less likely to experience the materialisation of interest rate or credit risk when hit by shocks. Using the euro area credit register and the pandemic shock for identification, we find that higher edge banks originate more credit, direct it towards more productive firms, and support more firm investment.
- JEL Code:
- E52,G12,G21,G28
- Network:
- Challenges for Monetary Policy Transmission in a Changing World Network (ChaMP)
- 7 May 2024
- 7 May 2024
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Weekly financial statementAnnexes
- 7 May 2024
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Weekly financial statement - Commentary
- 6 May 2024
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Working Paper Series - Issue No. 2936Details
- Abstract:
- In this paper I investigate the retirement-consumption puzzle in Italy for the period 2010-2016, using SHIW data. In order to address the endogeneity of the retirement decision, I estimate the effect of retirement by exploiting the exogeneity of pension eligibility in an instrumental variable approach; the IV regression is then applied in a regression discontinuity design where only households close to the eligibility point are considered. The eligibility-instrument is found to be a strong predictor of the retirement decision, and the estimated non-durable consumption drop is equal to 12.3%. When households are distinguished according to the gender of the household head, female-led households are found to undergo a consumption decline that is more than double that estimated for households with male heads. The data and the literature on the subject indicate that this large difference is likely related to the gender pay-gap that translates into a gender pension-gap. Moreover, the consumption decline appears to be concentrated in households in the lower part of the wealth distribution. Nonetheless, households in the lowest wealth quintile, do not show a significant consumption decline. The data suggests that this might be due to the impossibility for these households to further reduce their consumption at retirement, as they are mostly composed of essential expenditures.
- JEL Code:
- E2,E21,E24,J26,C01
- 6 May 2024
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The ECB BlogDetails
- JEL Code:
- J21,J24,J22,J23
- Subtitle:
- Surprisingly strong employment growth in an environment of weak economic activity has recently led to declining labour productivity in the euro area. The ECB Blog discusses causes and prospects for a cyclical recovery in productivity growth.
- 6 May 2024
-
InterviewDetails
- Subtitle:
- Interview with Philip R. Lane, Member of the Executive Board of the ECB, conducted on 30 April 2024 by Miquel Roig, Javier Jorrín and Óscar Giménez and published on 6 May 2024
- 5 May 2024
- 3 May 2024
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MFI interest rate statistics
- 2 May 2024
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SpeechDetails
- Subtitle:
- Guest lecture by Philip R. Lane, Member of the Executive Board of the ECB, at Stanford Graduate School of Business
- 2 May 2024
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The ECB BlogDetails
- JEL Code:
- G18,G21,G28
- Subtitle:
- Some banks reduce balance sheet items around reporting dates. Such “window dressing” camouflages the true risks of a bank, impairs markets as well as bank resilience and supervision. The ECB Blog looks at how regulators and supervisors are taking action.
- 2 May 2024
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€STR Transparency on errors
- 30 April 2024
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Disaggregated financial statement
- 30 April 2024
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Weekly financial statementAnnexes
- 30 April 2024
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Weekly financial statement - Commentary
- 29 April 2024
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SpeechDetails
- Subtitle:
- Introductory remarks by Luis de Guindos, Vice-President of the ECB, at a Euro 50 Group meeting
- 26 April 2024
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Working Paper Series - Issue No. 2935Details
- Abstract:
- We evaluate how the euro area economy would have performed since mid-2021 under alternative monetary policy strategies. We use the ECB’s workhorse estimated DSGE model and contrast actual policy conduct against alternative strategies which differ in their ”lower-for-longer” commitment as well as policymaker preferences regarding inflation and output volatility. Assuming that the monetary authority had full knowledge of prevailing conditions from mid-2021 onwards, the alternative policy strategies would call for anticipated timing of the start of the hiking cycle: earlier tightening would prevent inflation from peaking at 10%, but the forceful tightening since 2022:Q3 prevented higher inflation from becoming entrenched. However, once evaluating monetary policy on real-time quarterly vintages of incoming data and projections, the alternative interest rate paths would be broadly consistent with the observed policy conduct. The proximity of some benchmark optimal policy counterfactuals with the baseline, brings further indication that the actual policy conduct succeeded in implementing an efficient management of the output-inflation trade-off.
- JEL Code:
- C53,E31,E42,E52,E58
- 26 April 2024
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Working Paper Series - Issue No. 2934Details
- Abstract:
- We establish basic facts about the external finance premium. Tens of millions of individual loan contracts extended to euro area firms allow studying the determinants of the external finance premium at the country, bank, firm, and contract levels of disaggregation. At the country level, the variance in the premium is closely linked to sovereign spreads, which are important in understanding financial amplification mechanisms. However, country-level differences only explain half of the total variance. The rest is predominantly attributed to variances at the bank and firm levels, which are influenced by the respective balance sheet characteristics. Studying the response of the external finance premium to monetary policy, we find that balance sheet vulnerabilities of banks and firms strengthen the transmission of policy measures to financing conditions. Moreover, our findings reveal an asymmetrical effect contingent upon the sign and type of the policies. Specifically, policy rate hikes and quantitative easing measures exert a more pronounced impact on lending spreads, further magnified through their repercussions on the external finance premium.
- JEL Code:
- E44,E58,F45,G15,G21
- 26 April 2024
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Euro area economic and financial developments by institutional sector (full)
- 26 April 2024
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Monetary developments in the euro areaAnnexes
- 26 April 2024
-
Press release
- 26 April 2024
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Consumer Expectation Survey
- 26 April 2024
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Consumer Expectation Survey
- 26 April 2024
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Consumer Expectation Survey
- 26 April 2024
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Consumer Expectation Survey
- 26 April 2024
- 25 April 2024
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Economic Bulletin
- 25 April 2024
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Economic Bulletin - BoxEconomic Bulletin Issue 3, 2024Details
- Abstract:
- Following the European Commission’s legislative proposals of April 2023, the ECOFIN Council reached an agreement on the reform of the fiscal rules underpinning the EU Stability and Growth Pact (SGP) on 20 December 2023. This box provides a preliminary assessment of the potential macroeconomic effects of the EU fiscal framework reform over the horizon of the March 2024 ECB staff macroeconomic projections for the euro area. In light of the agreement reached by the EU co-legislators on 10 February 2024, the box concludes that adhering to the requirements under the revised fiscal framework would imply some additional fiscal tightening over 2025-26, which, in turn, may entail some downside risks to growth, although these are rather small. The inflation impact is assessed as being limited.
- JEL Code:
- E62,O40,E31
- 25 April 2024
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Economic Bulletin - BoxEconomic Bulletin Issue 3, 2024Details
- Abstract:
- When long-term inflation-linked swap (ILS) rates for the euro area peaked in summer 2023, some observers expressed concerns that ILS rates reflected not only inflation compensation, but also non-fundamental “technical” factors. Such factors potentially reduced the usefulness of ILS rates in terms of gauging inflation expectations and risks. This box contributes to that discussion using a novel econometric approach, suggesting that there is, on average, little scope for technical factors to affect ILS rates. At the same time, the results also suggest that the signal from ILS rates may have been distorted somewhat during episodes of extremely high market volatility (e.g. the global financial crisis, the start of the COVID-19 pandemic and the aftermath of the Russian invasion of Ukraine). However, those distortions were short-lived and mainly affected short-term ILS rates, while longer maturities appear to have been less affected.
- JEL Code:
- E44,G12,G13
- 25 April 2024
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Economic Bulletin - BoxEconomic Bulletin Issue 3, 2024Details
- Abstract:
- Changes in energy prices and wage costs can, to the extent these are passed through to consumer prices, have important effects on HICP inflation excluding energy and food (HICPX). Data from different sources can be matched to obtain the cost shares of energy and wages in various sectors. Since the importance of changes in input costs is likely to increase with the share of such costs in the overall input costs or in the production of a service or a good, this information allows HICPX inflation to be broken down into indicators for energy-sensitive and not energy-sensitive items, as well as into contributions from wage-sensitive and not wage-sensitive items. The energy-sensitive HICPX inflation indicator derived in this way illustrates the important role of the energy shock in HICPX inflation developments over the last few years. Similarly, the indicator for wage-sensitive HICPX inflation signals an important role for wages as a driver of underlying inflation in the euro area, especially more recently. The two indicators have little overlap – which helps in interpreting their signals.
- JEL Code:
- E31,P44,J30,Q4
- 25 April 2024
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Economic Bulletin - BoxEconomic Bulletin Issue 3, 2024Details
- Abstract:
- This box investigates the drivers of the weakness in euro area imports in 2023. After rebounding in mid-2022 as a result of the easing supply bottlenecks for goods and the lifting of mobility restrictions in the aftermath of the pandemic, the euro area imports-to-GDP ratio fell in the first quarter of 2023 and has remained at a lower level since then. We show this is mainly due to the composition of GDP growth following a period characterised by weak exports and consumption. These are two of the most import-intensive components of GDP, in particular exports, owing to the downstream position of the euro area in the supply chain. Destocking also had an important role in the decline, as well as the shift in consumption from goods to services, which are less import intensive.
- JEL Code:
- F14,E21,E22,E32
- 25 April 2024
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Economic Bulletin - BoxEconomic Bulletin Issue 3, 2024Details
- Abstract:
- Headline and core inflation levels and momentum dynamics in the euro area are currently somewhat weaker than in the United States, reflecting buoyant rent inflation and consumption growth in the United States but also the different cyclical positions of the two economies. Core inflation remains elevated overall in both economic areas, due notably to high levels of services inflation. At the same time, goods inflation has declined considerably, in line with the normalisation of disrupted supply chains at the global level and lower commodity prices. Labour costs started moderating earlier in the United States, with euro area wage growth peaking later and productivity growth being muted by cyclical and structural factors.
- JEL Code:
- E24,E31,E58
- 25 April 2024
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SpeechDetails
- Subtitle:
- Slides presented by Isabel Schnabel, Member of the Executive Board of the ECB, at the Inaugural conference of the ChaMP Research Network “Challenges for Monetary Policy Transmission in a Changing World (“ChaMP”)”
- 24 April 2024
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Working Paper Series - Issue No. 2933Details
- Abstract:
- Banks in the euro area can generate high-quality liquid assets (HQLA) by borrowing central bank reserves from the Eurosystem against non-HQLA collateral. This paper quantifies the extent of this liquidity transformation and finds that on average EUR 0.92 of net HQLA are generated for each euro of credit provided by the Eurosystem. The paper then identifies intentional liquidity transformation using two novel approaches: The first approach compares the liquidity profile of already pledged vs new collateral, and the second approach compares the liquidity profile of the pool of pledged securities with banks' total eligible securities holdings. Both approaches show that banks use their least liquid assets as collateral first and pledge more liquid assets only at the margin. This intentional liquidity transformation is sizable and accounts for 30-60% of generated HQLA. These results are relevant for calibrating the collateral framework as well as the optimal size and composition of the Eurosystem balance sheet.
- JEL Code:
- C23,E52,E58,G28
- 24 April 2024
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Economic Bulletin - ArticleEconomic Bulletin Issue 3, 2024Details
- Abstract:
- The pricing decisions of firms are a key determinant of inflation. To understand inflation dynamics, it is necessary to analyse how often and by how much individual prices change. This article discusses what micro price data gathered by the European System of Central Banks’ Price-setting Microdata Analysis Network (PRISMA) tell us about the way firms set their prices. The results point to state dependence in pricing, whereby firms change prices more frequently following large shocks. This also affects the transmission of monetary policy. Evidence from recent microdata as at the end of 2023 suggests that, after an increase in the frequency of price changes following the unusually large shocks experienced since 2020, price changes in the euro area are starting to behave in a more similar way to the pre-pandemic period.
- JEL Code:
- E31,E52
- 24 April 2024
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SpeechDetails
- Subtitle:
- Speech by Piero Cipollone, Member of the Executive Board of the ECB, at the ECB conference on “An innovative and integrated European retail payments market”
- 23 April 2024
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Weekly financial statementAnnexes
- 23 April 2024
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Weekly financial statement - Commentary
- 23 April 2024
- 23 April 2024
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Working Paper Series - Issue No. 2932Details
- Abstract:
- We analyze, for the first time, how firms choose the currency in which they price transactions in international trade of services and investigate, using direct evidence, whether the US dollar (USD) plays a dominant role in services trade. Drawing on a new granular dataset on extra-European Union exports of Portuguese firms broken down by currency, we show that currency choices in services trade are active firm-level decisions. Firms that are larger and rely more on inputs priced in foreign currencies are less likely to use the domestic currency to export services. Importantly, we show that the USD has a dominant role as a vehicle currency in trade of services – but to a lesser extent than in trade of goods – and that this is not just due to differences in the geography of trade. An external validity test based on macro data available for Portugal and six other European countries confirms this finding. In line with predictions from recent theoretical models, our results are consistent with the lower prevalence of USD in services trade arising from a lower openness of services markets and a stronger reliance of services on domestic inputs.
- JEL Code:
- F14,F31,F41
- 23 April 2024
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Working Paper Series - Issue No. 2931Details
- Abstract:
- This paper investigates the sensitivity of the demand for safe government debt to currency unhedged and hedged excess returns in a sample of US mutual funds. We find evidence of active rebalancing towards government bonds that offer relatively higher returns on an unhedged basis, in particular euro denominated securities. The size of the effect is large, leading to a change in portfolio share by around one percentage point on average in response to a change by one percentage point in the currency-specific excess return. Interestingly, mutual funds rebalance their portfolio towards currencies, such as the Japanese yen, that display large deviations in the covered interest parity and offer higher returns than US Treasuries on an hedged basis. Finally, when global financial risk is on the rise, US mutual fund managers repatriate their investments towards US government debt securities, mainly at the expenses of euro-denominated ones. Our results imply that deviations in pricing conditions like uncovered and covered interest parity for sovereign bonds affect capital flows from the United States towards other major currency areas.
- JEL Code:
- F3,G11,G12,G15,G23
- 23 April 2024
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Economic Bulletin - ArticleEconomic Bulletin Issue 3, 2024Details
- Abstract:
- This article shows that trust in the ECB needs to be analysed and understood as a multifaceted concept. Analysis of data from the Consumer Expectations Survey shows that trust is not a matter of “yes” or “no”,rather, it exists on a spectrum. On aggregate, the distribution of individuals’ expressions of trust shows that trust in the ECB held up well during the pandemic and in the period of heightened inflation thereafter. On a scale of 0 to 10, a majority of respondents have a trust level between 5 and 8. The survey shows that the distribution of expressions of trust has been relatively stable since 2020, reflecting the stability of opinions at the individual level. Once individuals have a view on the ECB, it appears that they are unlikely to change their opinion quickly. At the same time, trust in the ECB co-moves strongly with trust in other institutions included in the survey. This suggests that, for many respondents, trust in the ECB may reflect their assessment of institutions in general, rather than an ECB-specific assessment.
- JEL Code:
- E58,F15,H11
- 23 April 2024
-
InterviewDetails
- Subtitle:
- Interview with Luis de Guindos, Vice-President of the ECB, conducted by Éric Albert on 16 April 2024 and published on 23 April 2024
- 22 April 2024
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SpeechDetails
- Subtitle:
- Speech by Christine Lagarde, President of the ECB, at Yale University in New Haven, USA
- 22 April 2024
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Working Paper Series - Issue No. 2930Details
- Abstract:
- We study how millions of granular and weekly household scanner data combined with machine learning can help to improve the real-time nowcast of German inflation. Our nowcasting exercise targets three hierarchy levels of inflation: individual products, product groups, and headline inflation. At the individual product level, we construct a large set of weekly scanner-based price indices that closely match their official counterparts, such as butter and coffee beans. Within a mixed-frequency setup, these indices significantly improve inflation nowcasts already after the first seven days of a month. For nowcasting product groups such as processed and unprocessed food, we apply shrinkage estimators to exploit the large set of scanner-based price indices, resulting in substantial predictive gains over autoregressive time series models. Finally, by adding high-frequency information on energy and travel services, we construct competitive nowcasting models for headline inflation that are on par with, or even outperform, survey-based inflation expectations.
- JEL Code:
- E31,C55,E37,C53
- Network:
- Price-setting Microdata Analysis Network (PRISMA)
- 22 April 2024
-
Working Paper Series - Issue No. 2929Details
- Abstract:
- We evaluate the effects of contagion and common exposure on banks’ capital through a regression design inspired by the structural VAR literature and derived from the balance sheet identity. Contagion can occur through direct exposures, fire sales, and market-based sentiment, while common exposures result from portfolio overlaps. We estimate the structural regression on granular balance sheet and interbank exposure data of the Canadian banking market. First, we document that contagion varies in time, with the highest levels around the Great Financial Crisis and lowest levels during the pandemic. Second, we find that after the introduction of Basel III the relative importance of risks has changed, hinting that sources of systemic risk have changed structurally. Our new framework complements traditional stress-tests focused on single institutions by providing a holistic view of systemic risk.
- JEL Code:
- G21,C32,C51,L14
- 22 April 2024
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Economic Bulletin - BoxEconomic Bulletin Issue 3, 2024Details
- Abstract:
- This box examines the current level of housing investment in the euro area as a whole, and in the four largest euro area economies, in relation to the evolution of the user cost of housing. To this end, the box proposes a novel quarterly measure of the user cost of housing by combining quarterly data on mortgage rates, long-term risk-free interest rates and expected house price growth with information on tax rates and structural characteristics of residential construction and housing finance. Furthermore, we use an empirical model to relate the level of housing investment to the user cost of housing. The model estimates suggest that euro area housing investment at the end of 2023 was still above the level implied by the user cost of housing despite a significant decline and with marked differences across countries. This highlights the possibility of further weakness in euro area housing investment, which could persist for some time if there is no significant decline in the user cost of housing.
- JEL Code:
- E22,E52,R21
- 22 April 2024
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Economic Bulletin - BoxEconomic Bulletin Issue 3, 2024Details
- Abstract:
- In recent quarters, euro area households have faced higher housing costs, and in particular rising rent or mortgage payments. The ECB Consumer Expectations Survey shows that housing cost dynamics vary across households depending on the type of ownership, with the highest cost increases being borne by those who do not own their home outright (mortgage and renter households). Since 2022 rising housing costs have, on average, largely been offset by growth in household income, leading to stable housing cost to household income ratios. The housing cost burden has, however, increased slightly for both renter and mortgage households at the upper end of the income distribution. Furthermore, at the lower end of the income distribution, a substantial proportion of households have been overburdened by their housing costs. Finally, there is a positive correlation between higher housing costs for households and late payment of rent or mortgages and of utilities. While the figures for late payment have, to date, remained relatively stable, an increasing number of households, especially those in lower income brackets, have indicated in recent months that they expect to fall behind with payments.
- JEL Code:
- E31,E52
- 19 April 2024
- 19 April 2024
- 19 April 2024
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SpeechDetails
- Subtitle:
- Statement by Christine Lagarde, President of the ECB, at the forty-ninth meeting of the International Monetary and Financial Committee
- 19 April 2024
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Working Paper Series - Issue No. 2928Details
- Abstract:
- The evidence suggests that monetary policy transmission is asymmetric over the business cycle. Interacting financing frictions with a preference for liquidity provides an explanation for this fact. Our mechanism generates monetary asymmetries in a model that jointly reproduces a set of asset market and business cycle facts. Accounting for the joint dynamics of asset prices and business cycle fluctuations is key; in a variant of the model that is unable to produce realistic macro-finance implications, monetary asymmetries disappear. Our results suggest that asymmetries in the transmission mechanism critically depend on the macro-finance implications of monetary policy models, and that resorting to nonlinear techniques is not sufficient to detect monetary asymmetries.
- JEL Code:
- E31,E44,E58
- 19 April 2024
-
Working Paper Series - Issue No. 2927Details
- Abstract:
- This study provides new evidence on the relationship between unconventional monetary policy and auction cycles in the euro area. Using proprietary data on purchases of public sector securities implemented by the Eurosystem, the paper examines the flow effects of asset purchase programmes on 10-year government bond yields in secondary markets around dates of public debt auctions. The findings indicate that Eurosystem’s asset purchase flows mitigate yield cycles during auction periods and counteract the amplification impact of market volatility. The dampening effect of central bank asset purchases on auction cycles is more sizeable and precisely estimated for purchases of securities with medium-term maturities and in jurisdictions with relatively lower credit ratings. The analysis has broader implications for monetary policy and market functioning in the euro area.
- JEL Code:
- E52,E58,G12,G14
- 19 April 2024
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Research Bulletin - Issue No. 118Details
- Abstract:
- Some firms have the capacity to contribute significantly to economic productivity but cannot obtain the necessary capital for investment, which instead flows to less productive firms. While “misallocation of capital” and its detrimental impact on productivity is traditionally beyond the scope of central banks, monetary policy can influence it through firms’ investment decisions. Using a New Keynesian model and granular data on Spanish firms, our results show that expansionary monetary policy reduces capital misallocation. However, in committing to an optimal policy course, central banks are better off sticking to price stability rather than exploiting this channel to influence productivity.
- JEL Code:
- E12,E22,E43,E52,L11
- 18 April 2024
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SpeechDetails
- Subtitle:
- Slides presented by Isabel Schnabel, Member of the Executive Board of the ECB, at the 2024 EU-US Symposium in Washington, DC
- 18 April 2024
-
Statistics Paper Series - Issue No. 48Details
- Abstract:
- Climate change entails risks to the global economy and impacts financial stability. Beyond managing related risks, the financial sector can also contribute to the transition toward a net-zero economy. Guided by the ECB’s climate and nature plan, this paper discusses the methodology and key findings of statistical indicators developed in three areas: sustainable finance, carbon emissions, and physical risk. Our work aims to enhance data transparency in climate change analysis, while informing monetary policy, financial stability and banking supervision. The indicators we have developed focus on the euro area financial sector and are built from harmonised granular datasets. They also utilise climate information from public sources to the extent possible.The sustainable finance metrics are built on well-established securities statistics and are at a more mature stage of development when compared with the other two climate risk indicators. While there are several data gaps that need to be addressed, the proposed statistical methodology offers a valuable framework for assessing climate risks in the European context, ensuring comparability across countries, time frames and under various climate scenarios. This paper discusses the methodology, underlying data, and findings for each set of indicators, while also flagging possible constraints and opportunities for future development.
- JEL Code:
- Q51,Q54,Q59
- 18 April 2024
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The ECB BlogDetails
- JEL Code:
- Q54,Q56,G21,G29
- Subtitle:
- We updated our data on the impact of climate change on the financial system. How green are green bonds and banks’ loan portfolios? How strongly could they be affected by natural hazards? The ECB Blog discusses these and other new insights from the data.
- 18 April 2024
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Balance of payments (monthly)
- 18 April 2024
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SpeechDetails
- Subtitle:
- Introductory remarks by Luis de Guindos, Vice-President of the ECB, at the ECON Committee of the European Parliament
Related- 18 April 2024
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Annual Report
- 18 April 2024
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Feedback on the input provided by the European Parliament as part of its resolution on the ECB’s Annual ReportRelated
- 18 April 2024
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Annual Report
- 18 April 2024
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Annual ReportRelated
- 22 February 2024
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Annual Accounts
- 18 April 2024
- 18 April 2024
- 17 April 2024
-
Occasional Paper Series - Issue No. 346Details
- Abstract:
- A digital euro would provide the general public with an additional means of payment in the form of risk-free central bank money in digital form that is universally accepted for digital payments across the euro area. A digital euro would offer a wide range of financial stability benefits, including safeguarding the role of public money and strengthening the strategic autonomy and monetary sovereignty of the euro area in the digital era. It would be designed to have no material impact on financial stability or the transmission of monetary policy. This paper shows the usefulness of digital euro safeguards, such as holding limits, that would limit the impact of the introduction of a digital euro on banks’ liquidity and on their reliance on central bank funding. To this end, it assesses how banks might respond to the introduction of a digital euro while seeking to maximise profitability and manage their risks for a range of holding limit scenarios. The results of the simulated impact on key liquidity metrics show that, with safeguards in place and on aggregate, the liquidity metrics of euro area banks would decline but remain well above regulatory minimums. In addition, the central bank funding ratios of euro area banks would not increase materially on aggregate and would remain contained overall.
- JEL Code:
- E42,E58,G21
- 17 April 2024
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SpeechDetails
- Subtitle:
- Keynote speech by Isabel Schnabel, Member of the Executive Board of the ECB, at the thirteenth conference organised by the International Research Forum on Monetary Policy, “Monetary Policy Challenges during Uncertain Times”, at the Federal Reserve Board, Washington, D.C.
Annexes- 17 April 2024
- 17 April 2024
-
SpeechDetails
- Subtitle:
- Slides by Piero Cipollone, Member of the Executive Board of the ECB, at a meeting with the Italian Banking Association
- 17 April 2024
-
Press release
- 16 April 2024
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Weekly financial statementAnnexes
- 16 April 2024
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Weekly financial statement - Commentary
- 16 April 2024
-
Working Paper Series - Issue No. 2926Details
- Abstract:
- We shed light on the demand for a central bank digital currency (CBDC) as a means of payment, based on survey payment data. We provide a quantitative framework to assess transactional demand for CBDC at the point of sale, accommodating a wide range of design choices. We develop a structural model of payment means adoption and usage and estimate CBDC demand based on individuals’ preferences for payment method attributes. We disentangle the friction potentially associated to CBDC adoption, assessing two of its potential drivers: information frictions and gradual diffusion of digital payment methods. We find that modelling adoption is key to understanding CBDC demand. Finally, we show that optimal CBDC design, information campaigns, and network effects can substantially boost demand.
- JEL Code:
- E41,E42,E47
- 15 April 2024
-
SpeechDetails
- Subtitle:
- Speech by Philip R. Lane, Member of the Executive Board of the ECB, at the University College Dublin Economics Society
- 15 April 2024
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Survey of Monetary Analysts - Aggregate results
- 15 April 2024
-
Digital Euro Preparation Phase document
- 14 April 2024
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Occasional Paper Series - Issue No. 345Details
- Abstract:
- This paper discusses the impact that a retail central bank digital currency (CBDC) could have on the implementation of monetary policy. Monetary policy implementation could be affected if the introduction of the retail CBDC changes the volume of commercial bank deposits held by customers, which would, in turn, affect central bank reserves. While it is often assumed that customer deposits would decrease if a CBDC was introduced, we provide arguments why this is by no means clear cut and deposits could even increase. If bank deposits do decrease, banks would need to draw on, and therefore reduce, their central bank reserve holdings. Moreover, uncertainty as to the timing and extent of any conversions of deposits into CBDC might prompt banks to scale up their demand for central bank reserves in order to hold larger precautionary buffers. Consequently, central banks might need to adjust their reserve supply and other features of their monetary policy implementation, depending, for example, on whether they use a floor or a corridor system for monetary policy implementation. In the specific case of the digital euro, the features already envisaged for its design would make it possible to minimise the risk of negative consequences for monetary policy implementation.
- JEL Code:
- E41,E42,E43,E52,E58,G21
- 12 April 2024
-
Governing Council decisions - Other decisions
- 12 April 2024
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SpeechDetails
- Subtitle:
- Keynote speech by Frank Elderson, Member of the Executive Board of the ECB and Vice-Chair of the Supervisory Board of the ECB, at the Delphi Economic Forum IX
- 12 April 2024
-
Working Paper Series - Issue No. 2925Details
- Abstract:
- This paper extends Boone (2008) by introducing a competition measure at the individual firm level rather than for an entire market segment. It is based on the elasticity between profits and efficiency and called marginal relative profitability (MRP). Its intuition is that when a small change in efficiency derived from marginal costs can cause a large change in profits, a firm exercises pressure on its peers and gains profits. The MRP is embedded in the theoretical framework of Boone and measures competition vis-à-vis other market participants. We apply this extended Boone indicator to individual bank-level competition in the loan market in the four largest euro area countries and Austria. The MRP distribution is skewed to the left and many banks have a MRP below one, indicating that those banks have little incentive to enhance their efficiency to increase their profits. The MRP approach is shown to be a powerful tool to test the efficient-structure, structure-conduct performance, and ‘quiet life’ hypotheses and to detect comparatively weak non-competitive banks. Our new measure of firm-level competition enriches and complements other competition measures and provides a promising starting point for future market power analyses.
- JEL Code:
- D4,L16,G21
- 12 April 2024
-
Working Paper Series - Issue No. 2924Details
- Abstract:
- Investment funds hold a disproportionately larger fraction of domestic relative to foreign stocks. Stock market development and familiarity (language and distance) are considered key determinants for home bias. The literature neglects however that investors often invest in foreign funds domiciled in financial centers. We use a “look-through approach” to account for this misclassification. First, we find substantially smaller home bias estimates compared to those in the literature. Second, the explanatory power of plausible home bias determinants is lower than previously documented. Third, familiarity only plays a meaningful role when investors are households, highlighting the role of investor sophistication.
- JEL Code:
- G11,G15,G23
- 12 April 2024
-
Press releaseRelated
- 12 April 2024
- 12 April 2024
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Survey on credit terms and conditions in euro-denominated securities financing and OTC derivatives marketsAnnexes
- 12 April 2024
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Other publication
- 12 April 2024
- 12 April 2024
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Other publicationAnnexes
- 12 April 2024
- 12 April 2024
-
Press releaseRelated
- 12 April 2024
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Survey of Professional Forecasters
- 12 April 2024
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Survey of Professional ForecastersAnnexes
- 12 April 2024
Related- 12 April 2024
- 12 April 2024
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Survey of Professional ForecastersAnnexes
- 12 April 2024
- 12 April 2024
- 12 April 2024
-
Economic Bulletin - BoxEconomic Bulletin Issue 3, 2024Details
- Abstract:
- This box summarises the findings of recent contacts between ECB staff and representatives of 57 leading non-financial companies operating in the euro area. According to these exchanges, which took place between 11 and 19 March 2024, aggregate activity was subdued at the start of the year, but there were some signs of a pick-up in demand and expectations of a gradual, albeit modest, recovery in the course of the year. Growth in selling prices picked up slightly in the first months of the year, owing mainly to a slight rebound in the prices of some intermediate goods and services. However, growth in prices closer to the final consumer continued to ease gradually, as did wage expectations.
- JEL Code:
- E2,E3,L2
- 11 April 2024
-
Digital Euro Preparation Phase document
- 11 April 2024
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Digital Euro Preparation Phase documentAnnexes
- 11 April 2024
-
Digital Euro Preparation Phase document
- 11 April 2024
-
Digital Euro Preparation Phase document
- 11 April 2024
-
Digital Euro Preparation Phase document
- 11 April 2024
-
Digital Euro Preparation Phase document
- 14 June 2024
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Digital Euro Preparation Phase document
- 11 April 2024
- 11 April 2024
-
Combined monetary policy decisions and statementRelated
- 11 April 2024
-
Monetary policy statement
- 11 April 2024
-
Monetary policy decision
- 11 April 2024
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Monetary policy statementDetails
- Subtitle:
- Christine Lagarde, President of the ECB, Luis de Guindos, Vice-President of the ECB, Frankfurt am Main, 11 April 2024
Related- 11 April 2024
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Combined monetary policy decisions and statement
- 11 April 2024
-
Monetary policy decision
- 11 April 2024
-
Monetary policy decisionRelated
- 11 April 2024
-
Combined monetary policy decisions and statement
- 11 April 2024
-
Monetary policy statement
- 9 April 2024
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Weekly financial statementAnnexes
- 9 April 2024
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Weekly financial statement - Commentary
- 9 April 2024
-
Euro area economic and financial developments by institutional sector (early)
- 9 April 2024
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Balance of payments (quarterly)
- 9 April 2024
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Press releaseRelated
- 9 April 2024
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Euro area bank lending survey
- 9 April 2024
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Euro area bank lending surveyAnnexes
- 9 April 2024
-
Euro area bank lending survey - Annex
Related- 9 April 2024
-
Press release
- 9 April 2024
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Euro area bank lending survey - Glossary
- 9 April 2024
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Euro area bank lending survey - Questionnaire
- 9 April 2024
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Digital Euro Preparation Phase - Scheme Rulebook Development Group documents
- 9 April 2024
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Digital Euro Preparation Phase - Scheme Rulebook Development Group documents
- 8 April 2024
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Press releaseRelated
- 8 April 2024
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Survey on the Access to Finance of Enterprises in the euro area
- 8 April 2024
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Survey on the Access to Finance of Enterprises in the euro areaAnnexes
- 8 April 2024
-
SAFE questionnaire
Related- 8 April 2024
- 5 April 2024
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MFI interest rate statistics
- 4 April 2024
-
Weekly financial statementAnnexes
- 4 April 2024
-
Weekly financial statement - Commentary
- 4 April 2024
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Monetary policy accountRelated
- 7 March 2024
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Monetary policy decision
- 4 April 2024
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Disaggregated financial statement
- 3 April 2024
-
Working Paper Series - Issue No. 2923Details
- Abstract:
- How a historic drop in bank deposits shapes banks’ loan supply? We exploit the effects of a large, and unexpected, increase in monetary policy rates to estimate the deposit channel of monetary policy using an extensive credit register that includes all bank-firm lending relationships in all euro area countries. We find that banks experiencing large deposit outflows reduce credit, but not the interest rate they charge, to the same borrower relative to other lenders. This credit restriction is stronger for fixed rate and longer maturity loans, but not for riskier borrowers. The effect is mostly driven by banks coming into the hiking period with a larger unhedged duration gap that renders borrowers of those banks more vulnerable to credit restrictions due to the deposit outflows as interest rates surge. We resort to the deposit beta as an instrument variable and a matched estimator that bear out the thrust of our results.
- JEL Code:
- E51,E58,G21
- 3 April 2024
-
Other publication
- 3 April 2024
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The ECB BlogDetails
- JEL Code:
- E40,E42,E62
- Subtitle:
- Governments and central banks can shield the economy from shocks with their decisions. The ECB Blog looks at a recent high-level conference that analysed the interaction of fiscal and monetary policy and questioned some long-held beliefs.
- 3 April 2024
- 3 April 2024
- 2 April 2024
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Press release
- 2 April 2024
-
Consumer Expectation Survey
- 2 April 2024
-
Consumer Expectation Survey
- 2 April 2024
-
Consumer Expectation Survey
- 2 April 2024
-
Consumer Expectation Survey
- 28 March 2024
-
Monetary developments in the euro areaAnnexes
- 28 March 2024
-
Monetary developments in the euro area
- 27 March 2024
-
SpeechDetails
- Subtitle:
- Remarks by Frank Elderson, Member of the Executive Board of the ECB and Vice-Chair of the Supervisory Board of the ECB, at an event on climate-related financial risks hosted by the Banco Central do Brasil
- 27 March 2024
-
Working Paper Series - Issue No. 2922Details
- Abstract:
- This paper analyses the consumer’s decision to apply for credit and the probability of the credit being accepted in the euro area during a period characterized by the unprecedented concomitance of events and changing borrowing conditions linked to the global COVID-19 pandemic and the Russian invasion of Ukraine. We use data between 2020Q1 and 2023Q2 from the ECB’s Consumer Expectations Survey. We find that the credit demand is highest when the first lockdown ends and drops when supportive monetary compensation schemes are implemented. There is evidence that constrained households are significantly less likely to apply for credit. Credit is more likely to be accepted under favourable borrowing conditions and after the approval of national recovery plans. We also find that demographic, economic factors, perceptions and expectations are associated with the demand for credit and the credit grant.
- JEL Code:
- C23,D12,D14,G51
- 27 March 2024
-
SpeechDetails
- Subtitle:
- Speech by Piero Cipollone, Member of the Executive Board of the ECB, at an event organised by the House of the Euro and the Centre for European Reform
Annexes- 27 March 2024
-
Speech
- 26 March 2024
-
Weekly financial statementAnnexes
- 26 March 2024
-
Weekly financial statement - Commentary
- 25 March 2024
-
Letters to MEPsRelated
- 25 March 2024
-
Digital Euro Governance
- 25 March 2024
-
Digital Euro Governance
- 25 March 2024
-
Survey of Monetary Analysts
- 22 March 2024
-
SpeechDetails
- Subtitle:
- Slides by Philip R. Lane, Member of the Executive Board of the ECB, at the Policy Lecture at Aix-Marseille School of Economics (AMSE) in Marseille
- 22 March 2024
-
Working Paper Series - Issue No. 2921Details
- Abstract:
- This paper studies the impact of voluntary climate commitments by banks on their lending activity. We use administrative data on the universe of bank lending from 19 European countries. There is strong selection into commitments, with increased participation by the largest banks and banks with the most pre-existing exposure to high-polluting industries. Setting a commitment leads to a boost in a lender’s ESG rating. Lenders reduce credit in sectors they have targeted as high priority for decarbonization. However, climate-aligned banks do not change their lending or loan pricing differentially compared to banks without climate commitments, suggesting they are not actively divesting. We can reject that climate-aligned lenders divest from firms in targeted sectors by more than 2.6%. Firm borrowers are no more likely to set climate targets after their lender sets a climate target, which casts doubt on active engagement by lenders. These results call into question the efficacy of voluntary commitments.
- JEL Code:
- Q50,G21
- 22 March 2024
-
Other publicationDetails
- Subtitle:
- Plausibility checks performed in Anacredit datasets
- 22 March 2024
-
The ECB BlogDetails
- JEL Code:
- G20,G28
- Subtitle:
- The Eurosystem is shrinking its balance sheet, which makes more government bonds available for purchase. The ECB Blog looks at how markets are adjusting to this new situation with regard to bond price volatility, liquidity and the impact on repo markets.
- 21 March 2024
-
Working Paper Series - Issue No. 2920Details
- Abstract:
- We examine rating behaviour after the introduction of new regulations regarding Credit Rating Agencies (CRAs) in the European securitisation market. Employing a large sample of 12,469 ABS tranches issued between 1998 and 2018, we examine the information content of yield spreads of ABS at the issuance and compare the pre- and post-GFC periods. We find that the regulatory changes have been effective in tackling conflicts of interest between issuers and CRAs in securitisation. Rating catering seems to have disappeared in the post-GFC period. Yet we see limited effectiveness on rating shopping. It follows that rating over-reliance might be an issue, especially for investors of higher-quality ABS.
- JEL Code:
- G21,G28
- 21 March 2024
-
Working Paper Series - Issue No. 2919Details
- Abstract:
- We use nonlinear empirical methods to uncover non-linearities in the propagation of monetary policy shocks. We find that the transmission on output, goods prices and asset prices is stronger in a low growth regime, contrary to the findings of Tenreyro and Thwaites (2016). The impact is stronger on private investment and durables and milder on the consumption of nondurable goods and services. In periods of low growth, a contractionary monetary policy implies lower expected Treasury rates and higher premia along the entire Treasury yield curve. Similarly, the corporate excess bond premium rises and the stock market drops substantially during recessions. We use the monetary policy surprises and their predictors provided by Bauer and Swanson (2023a), and identify an additional predictor, the National Financial Condition Index (NFCI), which is relevant in the nonlinear setting. A Threshold VAR, a Smooth-Transition VAR and nonlinear local projection methods all corroborate the findings.
- JEL Code:
- C32,E32
- 21 March 2024
- 21 March 2024
-
Economic Bulletin
- 21 March 2024
-
Balance of payments (monthly)
- 21 March 2024
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Economic Bulletin - BoxEconomic Bulletin Issue 2, 2024Details
- Abstract:
- Climate change is increasingly affecting the euro area economy. That is why the ECB is committed to integrating climate change considerations into its activities. On 30 January 2024 the ECB published its climate and nature plan 2024-2025, which identifies three focus areas for its future work: (i) navigating the transition towards a green economy,(ii) addressing the increasing physical impact of climate change,and (iii) advancing work on nature-related risks. This box sets out the economic reasoning behind the ECB’s decision to advance its work in these three areas.
- JEL Code:
- E50,Q43,Q54
- 21 March 2024
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Economic Bulletin - BoxEconomic Bulletin Issue 2, 2024Details
- Abstract:
- The global role of a currency can be measured in several ways, including by looking at its use in payments. After March 2023 the share of the euro in total Swift payment messages (i.e. payment instructions sent via the Swift network) appeared to drop. This coincided with a major infrastructure change in Europe – namely, the launch of the Eurosystem’s next-generation large-value payment system for the euro, T2, which replaced TARGET2 – and a move to a new Swift message standard. The associated technical changes have altered the ways in which banks make euro payments and manage euro liquidity, resulting in a break in the data on euro‑denominated Swift payment messages. In fact, the total value of euro payments settled in T2 has actually remained largely stable relative to figures for its predecessor, TARGET2, and so has the global reach of the payment system. This analysis shows the importance of accounting for technical factors when interpreting indicators based on payment traffic.
- JEL Code:
- E42,F40,G21
- 21 March 2024
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Economic Bulletin - BoxEconomic Bulletin Issue 2, 2024Details
- Abstract:
- This box describes liquidity conditions and the Eurosystem monetary policy operations during the seventh and eighth maintenance periods of 2023, from 1 November 2023 to 30 January 2024.
- JEL Code:
- E40,E52,E58
- 21 March 2024
-
Economic Bulletin - BoxEconomic Bulletin Issue 2, 2024Details
- Abstract:
- This box looks at errors in Eurosystem and ECB staff inflation projections over the post-pandemic period, updating and extending earlier analysis published in 2022 and 2023. Projection errors have come down considerably since the end of 2022 and now stand close to pre-pandemic levels. The low predictability of energy commodity prices (which surprised markets on the downside in 2023) explains a significant share of the recent errors in HICP inflation projections. The remaining errors are likely to stem from non-standard transmission of the exceptional shocks to commodity prices and global supply chains – which, together with demand shocks, explain a large share of the post-pandemic dynamics of HICP inflation excluding food and energy (HICPX), including in 2023. Eurosystem and ECB staff continue to refine their forecasting toolkits, providing additional analysis that informs projections in times of high uncertainty.
- JEL Code:
- E31,C53,E37
- 21 March 2024
-
Economic Bulletin - BoxEconomic Bulletin Issue 2, 2024Details
- Abstract:
- Rising trade tensions and a spate of policies aiming to bring national security concerns to bear in trade relations have sparked growing concern about the potential implications of global trade fragmentation. Yet, empirical evidence that geopolitical concerns are already materially affecting trade patterns is scant. This box addresses the issue using a structural gravity model augmented with a geopolitical distance measure based on UN General Assembly voting to investigate the role played by geopolitical factors for trade in manufacturing goods over the period 2012-22. It provides evidence that the degree of geopolitical alignment is playing an increasing role in determining bilateral trade flows. The impact of geopolitical distance on trade is heterogeneous: in particular, geopolitical considerations mostly affect European trade in strategic products.
- JEL Code:
- F10,F13,F14,F15
- 21 March 2024
-
Economic Bulletin - BoxEconomic Bulletin Issue 2, 2024Details
- Abstract:
- Recent volatility in oil and gas prices has rekindled interest in understanding how much fundamental factors – global supply and demand – and non-fundamental factors contribute to price movements. This box constructs indices of speculation based on futures positions. Overall, speculation has only a limited role in both oil and gas price dynamics, although the degree of speculation is somewhat higher in European gas markets than in US gas markets. Empirical estimates also suggest that the role of speculation in amplifying the transmission of fundamental shocks to oil prices is limited, including in times of heightened geopolitical risk.
- JEL Code:
- Q02,F01,F51
- 20 March 2024
-
SpeechDetails
- Subtitle:
- Speech by Isabel Schnabel, Member of the Executive Board of the ECB, at The ECB and its Watchers XXIV Conference, organised by the Institute for Monetary and Financial Stability, Goethe University, Frankfurt am Main
Annexes- 20 March 2024
-
Speech
- 20 March 2024
-
SpeechDetails
- Subtitle:
- Slides by Philip R. Lane, Member of the Executive Board of the ECB, at The ECB and its Watchers XXIV Conference, organised by the Institute for Monetary and Financial Stability, Goethe University, Frankfurt am Main
- 20 March 2024
-
Economic Bulletin - BoxEconomic Bulletin Issue 2, 2024Details
- Abstract:
- Food price inflation was one of the main contributors to the strong rise in euro area headline inflation in 2022 and to the period of disinflation that followed. An extraordinary surge in energy costs was the main factor behind higher consumer food inflation in 2021 and 2022. Increases in global food commodity prices and euro area farm gate prices also contributed significantly. In the high inflation environment, domestic factors – such as wage and profit developments – have gradually emerged as increasingly important factors in keeping food inflation elevated. The exceptional, largely externally driven shocks to energy, global food commodity and euro area farm gate prices are fading, and this is expected to contribute to a moderation in food inflation in the course of 2024. However, strong wage growth implies only a gradual unwinding going forward.
- JEL Code:
- E31,Q02,Q43
- 20 March 2024
-
Economic Bulletin - BoxEconomic Bulletin Issue 2, 2024Details
- Abstract:
- This box investigates how households have responded to the 2021-23 inflationary episode using evidence from the ECB’s Consumer Expectations Survey. The findings suggest that households have primarily adjusted their consumption spending to cope with higher inflation. However, noteworthy adjustments were also observed through the saving and income margins. The decline in the saving rate in 2022 and 2023 was mainly attributed to increased spending on recreation and travel, mostly driven by high-income consumers.
- JEL Code:
- E21,D14,D15
- 20 March 2024
-
SpeechDetails
- Subtitle:
- Speech by Christine Lagarde, President of the ECB, at The ECB and its Watchers XXIV Conference, organised by the Institute for Monetary and Financial Stability, Goethe University, Frankfurt am Main
- 19 March 2024
- 19 March 2024
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Weekly financial statementAnnexes
- 19 March 2024
-
Weekly financial statement - Commentary
- 19 March 2024
-
Economic Bulletin - ArticleEconomic Bulletin Issue 2, 2024Details
- Abstract:
- Recent shocks such as the pandemic and the energy shock triggered by Russia’s unjustified war against Ukraine have interacted with other structural changes, including the green and digital transitions, leading to an uncertain impact on the medium-term productivity prospects of the euro area. This article summarises the key results of recent work on productivity by a group of experts from the European System of Central Banks (ESCB). The analysis builds on previous work undertaken in the context of the ECB monetary policy strategy review.
- JEL Code:
- D24,E24,J24,J38,O33,O38,O47,Q54,Q58
- 19 March 2024
-
Research Bulletin - Issue No. 117Details
- Abstract:
- The pandemic's disruption of global supply chains and the spike in natural gas prices following Russia’s invasion of Ukraine were significant drivers of surging inflation. Traditional inflation models often ignore such supply-side shocks, even though they can have a significant and persistent impact on core inflation in the euro area (as measured by rates of change in the Harmonised Index of Consumer Prices excluding the energy and food components). In response, we propose a new model that takes these and other factors into account, particularly as future inflation dynamics could be shaped by the impact of geopolitical tensions on supply chains and the role of gas in the green transition.
- JEL Code:
- E31,C32,C38
- 19 March 2024
-
InterviewDetails
- Subtitle:
- Interview with Luis de Guindos, Vice-President of the ECB, conducted by Michalis Psilos
- 18 March 2024
- 18 March 2024
- 18 March 2024
-
Digital Euro Preparation Phase - Scheme Rulebook Development Group documentsAnnexes
- 18 March 2024
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Digital Euro Preparation Phase - Scheme Rulebook Development Group documents
- 18 March 2024
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Digital Euro Preparation Phase - Scheme Rulebook Development Group documentsAnnexes
- 18 March 2024
-
Digital Euro Preparation Phase - Scheme Rulebook Development Group documents
- 18 March 2024
-
Digital Euro Preparation Phase - Scheme Rulebook Development Group documentsAnnexes
- 18 March 2024
-
Digital Euro Preparation Phase - Scheme Rulebook Development Group documents
- 18 March 2024
-
Digital Euro Preparation Phase - Scheme Rulebook Development Group documentsAnnexes
- 18 March 2024
-
Digital Euro Preparation Phase - Scheme Rulebook Development Group documents
- 18 March 2024
-
Digital Euro Preparation Phase - Scheme Rulebook Development Group documentsAnnexes
- 18 March 2024
-
Digital Euro Preparation Phase - Scheme Rulebook Development Group documents
- 18 March 2024
-
Digital Euro Preparation Phase - Scheme Rulebook Development Group documentsAnnexes
- 18 March 2024
-
Digital Euro Preparation Phase - Scheme Rulebook Development Group documents
- 18 March 2024
-
Digital Euro Preparation Phase - Scheme Rulebook Development Group documentsAnnexes
- 18 March 2024
-
Digital Euro Preparation Phase - Scheme Rulebook Development Group documents
- 18 March 2024
-
Working Paper Series - Issue No. 2918Details
- Abstract:
- This paper provides insights into the determinants of currency choice in cross-border bank lending, such as bilateral distance, financial and trade linkages to issuer countries of major currencies, and invoicing currency patterns. Cross-border bank lending in US dollars, and particularly in euro, is highly concentrated in a small number of countries. The UK is central in the international network of loans denominated in euro, although there are tentative signs that this role has diminished for lending to non-banks since Brexit. Offshore financial centres are pivotal for US dollars loans, reflecting, in particular, lending to non-bank financial intermediaries in the Cayman Islands, possibly as a result of regulatory and tax optimisation strategies. The empirical analysis suggests that euro-denominated loans face the “tyranny of distance”, in line with predictions of gravity models of trade, in contrast to US dollar loans. Complementarities between trade invoicing and bank lending are found for both the euro and the US dollar.
- JEL Code:
- F31,F33,F34,F36,G21
- 18 March 2024
-
Economic Bulletin - ArticleEconomic Bulletin Issue 2, 2024Details
- Abstract:
- This article uses comprehensive ECB survey data to examine the narrative that a general shift towards digital payments is generating a sharp divide in payments behaviours, creating a binary world of digital “haves” and analogue “have-nots”. Our analysis challenges this narrative, revealing a more complex reality of payment behaviours at the point of sale. We focus on lack of ownership of the primary tools enabling digital payments in the euro area: debit or credit cards and payment accounts. In particular, we examine the group of people who lack at least one of these tools (either a debit or credit card or a payment account), assessing their cash payment patterns and their socio-demographic profiles against the rest of the population. The findings establish that cash remains a significant part of the payments ecosystem, even among people with both cards and accounts. Additionally, we show that the group of people without either cards or accounts has a diverse demographic profile. The analysis also assesses the reasons behind not having at least one of these two tools to enable digital payments. We show that perceived physical banking presence (defined as considering it easy to reach a bank branch or an ATM) is of limited importance, suggesting that personal choice or other demand-side factors may be of greater importance. We also show the relevance of payment habits through the persistence of cash habits even after the coronavirus (COVID-19) pandemic. The results are in line with the cash and retail payments strategies of the Eurosystem, which emphasise the need for a balanced approach that accommodates both the enduring role of cash and digital innovation.
- JEL Code:
- E41,O33,E42,E58,O52
- 15 March 2024
-
SpeechDetails
- Subtitle:
- Slides by Philip R. Lane, Member of the Executive Board of the ECB, at the seminar at Imperial College Business School in London
- 15 March 2024
-
Occasional Paper Series - Issue No. 344Details
- Abstract:
- This paper takes stock of the ECB’s macroeconometric modelling strategy by focusing on the models and applications used in the Forecasting and Policy Modelling Division. We focus on the guiding principles underpinning the current portfolio of the main macroeconomic models and illustrate how they can in principle be used for economic forecasting, scenario and risk analyses. We also discuss the modelling agenda which is currently under development, focusing notably on heterogeneity, machine learning, expectation formation and climate change. The paper makes it clear that the large macroeconometric models typically developed in central banks remain stylised descriptions of our modern economies and can fail to predict or assess the nature of economic events (especially when big crises arise). But even in highly uncertain economic conditions, they can still provide a meaningful contribution to policy preparation. We conclude the paper with a roadmap which will allow the ECB and the Eurosystem to exploit technological advances and cooperation across institutions as a useful means of ensuring that the modelling framework is not only resilient to disruptive events but also innovative.
- JEL Code:
- C30,C53,C54,E52
- 14 March 2024
-
SpeechDetails
- Subtitle:
- Speech by Isabel Schnabel, Member of the Executive Board of the ECB, at the Money Market Contact Group meeting
Annexes- 14 March 2024
- 14 March 2024
-
Working Paper Series - Issue No. 2917Details
- Abstract:
- We study the impact of a liquidity shock affecting investment funds on the financing conditions of firms. The abrupt liquidity needs of investment funds, triggered by the outbreak of the Covid-19 pandemic, prompted a retrenchment from bond purchases of firms and a withdrawal of short term funds from banks, impacting firm financing costs directly via bond markets, and indirectly via banks. According to our results, the spreads of corporate bonds held by investment funds increased. Furthermore, an increase in the short term funding exposure of a bank to investment funds triggered a contraction in new loans to euro area firms. Overall, our results show that while non-banks in general support firm financing by acting as a spare tyre when banks do not, their own stress can trigger a contractionary credit supply effect for firms.
- JEL Code:
- E52,G23,G30
- 14 March 2024
-
The ECB BlogDetails
- Subtitle:
- Central banks have been collecting art for a long time. While the works were previously only accessible at their physical locations, more and more central banks now make their collections available online. The ECB Blog showcases four collections you can enjoy from wherever you are.
- 13 March 2024
- 13 March 2024
- 13 March 2024
- 13 March 2024
-
SpeechDetails
- Subtitle:
- Slides by Piero Cipollone, Member of the Executive Board of the ECB, at Convegno Innovative Payments
- 13 March 2024
-
Working Paper Series - Issue No. 2916Details
- Abstract:
- Using pan-European credit register data, we analyze the sharp increase in public guaranteed lending (PGL) during the COVID-19 loan guarantee programs and show that banks leverage PGL to expand lending to low-emission firms. This behavior is driven by industries less affected by COVID-19, banks with ”browner” portfolios, and younger firms. Notably, compared to high-emission firms, banks’ internal risk assessments in PGL to low-emission firms are less frequently updated and exhibit weaker predictive power for future credit quality deterioration, indicating lax monitoring efforts. These findings highlight the additional information production costs associated with green lending and shed light on why banks may be slow to transition to greener portfolios.
- JEL Code:
- G20,G21,G28
- 12 March 2024
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Weekly financial statementAnnexes
- 12 March 2024
-
Weekly financial statement - Commentary
- 12 March 2024
-
Working Paper Series - Issue No. 2915Details
- Abstract:
- This paper contributes to understanding consumers' retail payment preferences and digitalisation in personal finances. We focus on the acceptance of cashless payments in everyday situations and the use of mobile banking apps in the euro area, where the payment services market has changed significantly in recent years. In particular, we study app-based tools for day-to-day (offline) purchases that involve small amounts of money as well as digital tools for managing personal finances. By looking at factors associated with using non-cash payment methods, and app-based financial services solutions, we shed light on the topic of financial inclusion in payment services that concern consumers’ everyday choices. Using granular microdata from the European Central Bank's Consumer Expectations Survey, we find that most people prefer to use only one payment instrument. After the COVID-19 pandemic, it has mostly been cash and contactless cards. The use of cash is partly due to limited perceived acceptance of non-cash payments by merchants. We also find substantial cross-country heterogeneity and highlight the prominent role of demographic factors in choosing non-cash payment options and app-based tools when managing personal finances. While mobile banking is already popular amongst euro area consumers, the use of smart payment methods remains very limited. Our findings suggest that financial service providers should recognize the growing preference of the younger generations for alternative payment methods. Creating awareness among consumers might also lead to positive feedback effects by reducing consumers’ reliance on cash through higher perceived availability of non-cash payment options.
- JEL Code:
- C13,D12,E42,O33
- 12 March 2024
- 11 March 2024
-
Working Paper Series - Issue No. 2914Details
- Abstract:
- Using randomized control trials (RCTs) applied over time in different countries, we study whether the economic environment affects how agents learn from new information. We show that as inflation rose in advanced economies, both households and firms became more attentive and informed about publicly available news about inflation, leading them to respond less to exogenously provided information about inflation and monetary policy. We also study the effects of RCTs in countries where inflation has been consistently high (Uruguay) and low (New Zealand) as well as what happens when the same agents are repeatedly provided information in both low-and high-inflation environments (Italy). Our results broadly support models in which inattention is an endogenous outcome that depends on the economic environment.
- JEL Code:
- E3,E4,E5
- 11 March 2024
-
Survey of Monetary Analysts - Aggregate results
- 11 March 2024
-
The ECB BlogDetails
- JEL Code:
- E31,E52,D81
- Subtitle:
- In 2021-22 inflation surged due to the direct and indirect effects of the energy shock, together with a set of pandemic-related factors and the Russian invasion of Ukraine. In this post on The ECB Blog, Chief Economist Philip R. Lane looks at the monetary policy actions taken by the ECB in response to these extraordinary inflation shocks.
- 8 March 2024
-
Working Paper Series - Issue No. 2913Details
- Abstract:
- We show that public guaranteed loans (PGL) increase credit availability improving real effects, but private banks’ incentives imply that weaker banks shift riskier corporate loans to taxpayers. We exploit credit register data during the COVID-19 shock in Spain, and a stylized model guides the empirics. Unlike non-PGL, banks provide more PGL to riskier firms in which banks have higher pre-crisis shares of firm total credit. Importantly, these effects are stronger for weaker banks. Results using firm(-bank) fixed effects and loan volume versus price information suggest a credit supply-driven mechanism. Moreover, exploiting exogenous variation across similar firms with differing PGL access, we confirm these findings, and we additionally show that PGL increases banks’ overall lending and credit share, with positive effects for firm survival and investment.
- JEL Code:
- G01,G21,G38,E62,H81
- 7 March 2024
- 7 March 2024
- 7 March 2024
-
Macroeconomic projections for the euro areaAnnexes
- 7 March 2024
-
Macroeconomic projections for the euro area
- 7 March 2024
-
Combined monetary policy decisions and statementRelated
- 7 March 2024
-
Monetary policy statement
- 7 March 2024
-
Monetary policy decision
- 7 March 2024
-
Monetary policy statementDetails
- Subtitle:
- Christine Lagarde, President of the ECB, Luis de Guindos, Vice-President of the ECB, Frankfurt am Main, 7 March 2024
Related- 7 March 2024
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Combined monetary policy decisions and statement
- 7 March 2024
-
Monetary policy decisionRelated
- 7 March 2024
-
Combined monetary policy decisions and statement
- 5 March 2024
-
Disaggregated financial statement
- 5 March 2024
-
Weekly financial statementAnnexes
- 5 March 2024
-
Weekly financial statement - Commentary
- 4 March 2024
-
MFI interest rate statistics
- 28 February 2024
-
Occasional Paper Series - Issue No. 343Details
- Abstract:
- This paper applies the semi-structural model proposed by Bernanke and Blanchard (2023) to analyse wage growth, price inflation and inflation expectations in the euro area. It is part of a broader project coordinated by Bernanke and Blanchard to provide a unified framework for analysing and comparing global inflation dynamics across the major world economic areas, including US, euro area, Canada, UK, and Japan. The paper makes four main contributions. First, it estimates the model using quarterly data from the euro area covering the period from the first quarter of 1999 to the second quarter of 2023. Second, it conducts an empirical assessment of how euro area price inflation responds to various exogenous shocks. This includes evaluating how shock transmission evolved during the pandemic and comparing it with experience in the United States. Third, the model decomposes the drivers of wage growth and price inflation in the post-pandemic period. It emphasises the transmission channels and the respective roles of supply and demand forces that have contributed to the recent inflationary surge. Notably, it identifies the impact of labour market tightness, productivity, global supply chain disruptions and energy and food price shocks. Finally, the model generates conditional projections based on these exogenous shocks, enabling a more robust cross-check of inflation forecasts during times of significant global economic disturbances.
- JEL Code:
- C5,E47,E52,E58,F4
- 27 February 2024
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Weekly financial statementAnnexes
- 27 February 2024
-
Weekly financial statement - Commentary
- 27 February 2024
-
Occasional Paper Series - Issue No. 342Details
- Abstract:
- The introduction of the Securities Financing Transactions Regulation into EU law provides a unique opportunity to obtain an in-depth understanding of repo markets. Based on the transaction-level data reported under the regulation, this paper presents an overview and key facts about the euro area repo market. We start by providing a description of the dataset, including its regulatory background, as well as highlighting some of its advantages for financial stability analysis. We then go on to present three sets of findings that are highly relevant to financial stability and focus on the dimensions of the different market segments, counterparties, and collateral, including haircut practices. Finally, we outline how the data reported under the regulation can support the policy work of central banks and supervisory authorities. We demonstrate that these data can be used to make several important contributions to enhancing our understanding of the repo market from a financial stability perspective, ultimately assisting international efforts to increase repo market resilience.
- JEL Code:
- G10,G18,G23
- 27 February 2024
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Occasional Paper Series - Issue No. 341Details
- Abstract:
- This paper studies the short-term and long-term consequences of the COVID-19 pandemic for productivity in Europe. Aggregate and sectoral evidence is complemented by firm-level data-based findings obtained from a large micro-distributed exercise. Productivity trends during the COVID-19 pandemic differed from past trends. Labour productivity per hour worked temporarily increased, while productivity per employee declined across sectors given the widespread use of job retention schemes. The extensive margin of productivity growth was muted to some degree by the policy support granted to firms. Firm entries declined while firm exits increased much less than during previous crises. The pandemic had a significant impact on the intensive margin of productivity growth and led to a temporary drop in within-firm productivity per employee and increased reallocation. Job reallocation was productivity-enhancing but subdued compared to the Great Recession. As confirmed by a granular data analysis of the distribution of employment subsidies and loan guarantees and moratoria, job reallocation and also debt distribution and“zombie firm” prevalence were not significantly affected by the COVID-19 policy support. The pandemic and related lockdowns accelerated changes in consumer preferences and working habits with potential long-term effects. Generous government support muted the surge in unemployment and reduced permanent scarring effects.
- JEL Code:
- D22,H25,J38,O47
- 27 February 2024
-
Occasional Paper Series - Issue No. 340Details
- Abstract:
- The impact of climate change on European Union (EU) countries and regions is poised to exhibit considerable diversity, influenced by factors encompassing average temperature, sectoral composition, developmental stages, and adaptation endeavours. The transition towards a more climate-friendly economy demands a well-orchestrated approach to mitigate enduring productivity costs. This shift will have varied implications for businesses, contingent upon their scale, access to financial resources, and capacity for innovation. The formulation of transition policies holds the potential to foster green innovation without displacing other initiatives, yet stringent climate regulations might impede the productivity ascent of pollutant-emitting enterprises. It will thus take time to reap the benefits of innovation. The efficacy of the policy mix is of critical importance in determining the trajectory of success. Market-driven mechanisms exhibit milder distortions compared to non-market-based strategies, though they may not inherently stimulate innovation. Significantly, subsidies earmarked for green research and development (R&D) emerge as a pivotal instrument for fostering innovation, thus constituting a vital component of the policy repertoire during the green transition. The implementation of transition policies will inevitably trigger a substantial reallocation of resources among and within sectors, potentially carrying short-term adverse ramifications. Notably, considerable productivity disparities exist between top and bottom emitters within specific industries. The transition period poses a risk to a substantial proportion of firms and can erode employment opportunities, with a likely decline in new ventures within affected sectors.
- JEL Code:
- D24,L52,O33,O38,Q54,Q58
- 27 February 2024
-
Occasional Paper Series - Issue No. 339Details
- Abstract:
- The productivity-enhancing effects of digitalisation have generated increased interest in the promotion of digital technologies. This report provides different estimations for euro area countries of the impact of digital uptake on productivity at firm level, showing that the adoption of digital technologies could lead to an increase in firms’ productivity in the medium term. However, not all firms and sectors experience significant productivity gains from digital adoption, and not all digital technologies deliver significant productivity gains. The report highlights possible factors behind the low productivity benefits of digitalisation in euro area countries. For example, a lack of strong institutions and governance structures may help to explain why digital diffusion is slower than expected, why it is slower in some countries than others and why the expected productivity benefits from digitalisation have not been fully achieved by now. Furthermore, the report suggests that the full benefits of the digital revolution will be reaped by properly supplying skills to firms and also by investing in computerised information in low-productivity firms.
- JEL Code:
- D24,E24,E22,J24,O33,O38,C67
- 27 February 2024
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Monetary developments in the euro areaAnnexes
- 27 February 2024
-
Monetary developments in the euro area
- 26 February 2024
-
SpeechDetails
- Subtitle:
- Speech by Christine Lagarde, President of the ECB, at the plenary session of the European Parliament
- 23 February 2024
-
Governing Council decisions - Other decisions
- 23 February 2024
- 23 February 2024
- 23 February 2024
- 23 February 2024
- 23 February 2024
-
SpeechDetails
- Subtitle:
- Slides by Isabel Schnabel, Member of the Executive Board of the ECB, at the Lecture on Monetary Policy and Financial Stability conference organised by Bocconi University in Milan
- 23 February 2024
-
Press release
- 23 February 2024
-
Consumer Expectation Survey
- 23 February 2024
-
Consumer Expectation Survey
- 23 February 2024
-
Consumer Expectation Survey
- 23 February 2024
-
Consumer Expectation Survey
- 22 February 2024
-
Monetary policy accountRelated
- 25 January 2024
-
Monetary policy decision
- 22 February 2024
-
Press releaseRelated
- 22 February 2024
-
Annual Accounts
- 22 February 2024
-
Annual consolidated balance sheet of the Eurosystem
- 22 February 2024
-
Annual consolidated balance sheet of the EurosystemAnnexes
- 21 June 2024
-
Annual consolidated balance sheet of the Eurosystem
Related- 22 February 2024
-
Press release
- 22 February 2024
-
Annual Accounts
- 22 February 2024
-
Annual AccountsRelated
- 22 February 2024
-
Press release
- 22 February 2024
-
Annual consolidated balance sheet of the Eurosystem
- 22 February 2024
-
The ECB BlogDetails
- JEL Code:
- G12,G20,G29
- Subtitle:
- Bitcoin has failed on the promise to be a global decentralised digital currency. Instead it is used for illicit transactions. The latest approval of an ETF doesn’t change the fact that Bitcoin is not suitable as means of payment or as an investment.
- 21 February 2024
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Working Paper Series - Issue No. 2912Details
- Abstract:
- When capital in the banking system becomes depleted, the degree to which financial intermediation and the macroeconomy are adversely affected is likely to depend on the financial and macroeconomic environment. However, existing studies either assume that the effects of bank capital shocks are linear or ignore feedback effects and the impact on the macroeconomy. Using data on the largest euro area countries and Bayesian Panel Threshold VARs, we investigate the importance of different factors in amplifying shocks in banks’ vulnerability to capital depletion. Our results demonstrate that nonlinearities matter. When the banking sector is already vulnerable to large capital losses, it is more difficult for banks to accommodate a depletion in capital and lending and economic activity contract more severely. Similarly, low interest rates, which are typically associated with low bank margins and profitability, also lead to a larger decline in lending. De-risking is also more pronounced in these cases. The state of the business cycle, though, does not influence the propagation of shocks to the same extent. We conclude that financial factors play a larger role than the macroeconomic environment in heightening shocks to banks’ vulnerability to capital depletion.
- JEL Code:
- C11,C33,E58,G21
- 21 February 2024
-
Working Paper Series - Issue No. 2911Details
- Abstract:
- We propose a novel methodology for solving Heterogeneous Agents New Keynesian (HANK) models with aggregate uncertainty and the Zero Lower Bound (ZLB) on nominal interest rates. Our efficient solution strategy combines the sequence-state Jacobian methodology in Auclert et al. (2021) with a tractable structure for aggregate uncertainty by means of a two-regimes shock structure. We apply the method to a simple HANK model to show that: 1) in the presence of aggregate non-linearities such as the ZLB, a dichotomy emerges between the aggregate impulse responses under aggregate uncertainty against the deterministic case; 2) aggregate uncertainty amplifies downturns at the ZLB, and household heterogeneity increases the strength of this amplification; 3) the effects of forward guidance are stronger when there is aggregate uncertainty.
- JEL Code:
- D14,E44,E52,E58
- 20 February 2024
-
Weekly financial statementAnnexes
- 20 February 2024
-
Weekly financial statement - Commentary
- 20 February 2024
-
Balance of payments (monthly)
- 20 February 2024
-
Research Bulletin - Issue No. 116Details
- Abstract:
- The 2021-22 surprise inflation surge had a major impact on households in the euro area. It reduced the real incomes and net wealth of most households as there was no immediate increase in nominal wages and pensions, nominal house prices and the nominal value of bonds, deposits, cash and debt following the rise in the price level. This influenced households’ present and future consumption and therefore their welfare. Although poorer households suffered most from the reduction in the purchasing power of their income, overall welfare losses were especially large for retirees because of the fall in the real value of their relatively large holdings of nominal assets. Conversely, younger and heavily indebted households benefited from the reduction in the real value of their liabilities. In this sense, this inflation episode mimicked an age-dependent tax. Indeed, not everyone was a net loser: while about 70% of households suffered a loss, the rest enjoyed moderate gains.
- JEL Code:
- D12,D14,D31,E21,E52,E58
- 19 February 2024
-
The ECB BlogDetails
- JEL Code:
- E50,E42
- Subtitle:
- Many banks worry their customers might withdraw deposits to hold digital euro instead. These fears are misplaced: a digital euro will be designed as a means of payment and not for investment, argue ECB Executive Board member Piero Cipollone, Ulrich Bindseil and Jürgen Schaaf.
- 19 February 2024
-
Survey of Monetary Analysts
- 16 February 2024
-
Working Paper Series - Issue No. 2910Details
- Abstract:
- Climate-related risks are due to increase in coming years and can pose serious threats to financial stability. This paper, by means of a DSGE model including heterogeneous firms and banks, financial frictions and prudential regulation, first shows the need of climate-related capital requirements in the existing prudential framework. Indeed, we find that without specific climate prudential policies, transition risk can generate excessive risk-taking by banks, which in turn increases the volatility of lending and output. We further show that relying on microprudential regulation alone would not be enough to account for the systemic dimension of transition risk. Implementing macroprudential policies in addition to microprudential regulation, leads to a Pareto improvement.
- JEL Code:
- D58,E58,E61,Q54
- 16 February 2024
-
SpeechDetails
- Subtitle:
- Inaugural lecture of the EMU Lab by Isabel Schnabel, Member of the Executive Board of the ECB, at the European University Institute
Annexes- 16 February 2024
- 15 February 2024
-
SpeechDetails
- Subtitle:
- Slides by Philip R. Lane, Member of the Executive Board of the ECB, at an online seminar on “Monetary Policy and Banks' Business Strategies”, organised by the Florence School of Banking and Finance as part of the Bank Board Academy
- 15 February 2024
-
Working Paper Series - Issue No. 2909Details
- Abstract:
- This paper studies how mortgage borrowers and house prices react to a tightening of mortgage limits following a policy change in Ireland in 2015. The policy introduced limits to the loan-to-income and loan-to-value ratios of new mortgages issued. In response to a tightening borrowing constraint, borrowers can choose to purchase a cheaper house or to reduce the leverage (LTV) of the mortgage. Using a difference-in-difference methodology, I find that groups of (poorer) borrowers, who were more likely to be above the loan-to-income threshold before the policy, responded primarily by buying cheaper houses after the policy change. On the other hand, groups of (richer) borrowers, who were more likely to be above the loan-to-value threshold, responded primarily by reducing the LTV of the mortgage. Borrowers who purchase cheaper houses could be buying smaller houses or the same size houses at a lower equilibrium price. To test for changes in equilibrium prices, I compare prices across postcodes and find that houses prices fell after the policy change in postcodes where a higher fraction of borrowers were above the loan-to-income threshold before the policy.
- JEL Code:
- G21,E21,E44,E58,R21,R30
- Network:
- ECB Lamfalussy Fellowship Programme
- 15 February 2024
-
SpeechDetails
- Subtitle:
- Speech by Christine Lagarde, President of the ECB, at the Hearing of the Committee on Economic and Monetary Affairs of the European Parliament
Annexes- 15 February 2024
- 15 February 2024
-
Speech
- 14 February 2024
-
SpeechDetails
- Subtitle:
- Slides by Piero Cipollone, Member of the Executive Board of the ECB, at the CEO Summit organised by EuroCommerce in Brussels
- 14 February 2024
-
SpeechDetails
- Subtitle:
- Introductory statement by Piero Cipollone, Member of the Executive Board of the ECB, at the Committee on Economic and Monetary Affairs of the European Parliament
- 14 February 2024
-
Working Paper Series - Issue No. 2908Details
- Abstract:
- We build a novel term structure model for pricing synthetic euro area core inflation-linked swaps, a hypothetical swap contract indexed to core inflation. Our approach relies on a term structure model of traded headline inflation-linked swap rates, which we assume span core inflation. The model provides estimates of market-based expectations for core inflation, as well as core inflation risk premia, at daily frequency, whereas core inflation expectations from surveys or macroeconomic projections are typically only available monthly or quarterly. We find that core inflation-linked swap rates are generally less volatile than headline inflation linked swap rates and that market participants expected core inflation to be substantially more persistent than headline inflation following the 2022 energy price spike. Using an event-study methodology, we also find that monetary policy shocks significantly lower core inflation expectations.
- JEL Code:
- E31,E44,E52
- 14 February 2024
-
SpeechDetails
- Subtitle:
- Speech by Luis de Guindos, Vice-President of the ECB, at the 8th Annual Conference of Mediterranean Central Banks, organised by Hrvatska narodna banka, Banco de España, OECD, IEMed, and UfM
- 13 February 2024
-
The ECB BlogDetails
- Subtitle:
- When reading data on reinvestments under the pandemic emergency purchase programme (PEPP) one needs to understand how we implement purchases. Director General Market Operations Imène Rahmouni-Rousseau and Executive Board member Isabel Schnabel explain how to avoid pitfalls.
Annexes- 13 February 2024
-
The ECB Blog
- 13 February 2024
-
Weekly financial statementAnnexes
- 13 February 2024
-
Weekly financial statement - Commentary
- 13 February 2024
-
Working Paper Series - Issue No. 2907Details
- Abstract:
- We develop a two-country DSGE model with financial frictions to study the transition from a steady-state without CBDC to one in which the home country issues a CBDC. The CBDC provides households with a liquid, convenient and storage-cost free means of payments which reduces the market power of banks on deposits. In the steady-state CBDC unambiguously improves welfare without disintermediating the banking sector. But macroeconomic volatility in the transition period to the new steady-state increases for plausible values of the latter. Demand for CBDC and money overshoot, thereby crowding out bank deposits and leading to initial declines in investment, consumption and output. We use non-linear solution methods with occasionally binding constraints to explore how alternative policies reduce volatility in the transition, contrasting the effects of restrictions on non-residents, binding caps, tiered remuneration and central bank asset purchases. Binding caps reduce disintermediation and output losses in the transition most effectively, with an optimal level of around 40% of steady-state CBDC demand.
- JEL Code:
- E50,E58,F30,F41
- 12 February 2024
-
SpeechDetails
- Subtitle:
- Introductory remarks by Piero Cipollone, Member of the Executive Board of the ECB, at the European Parliamentary Week 2024
- 12 February 2024
-
Working Paper Series - Issue No. 2906Details
- Abstract:
- This paper studies how demographics affect aggregate labor market power, the urban wage premium and the spatial concentration of population. I develop a quantitative spatial model in which labor market competitiveness depends on the demographic composition of the local workforce. Using highly disaggregated administrative data from Germany, I find that firms have more labor market power over older workers: The labor supply elasticity decreases from more than 2 to 1 from age 20 to 64. Calibrating the model with the reduced-form elasticity estimates, I find that differences in labor supply elasticities across age groups can explain 4% of the urban wage premium and 2% of the spatial concentration of population. Demographics and skill together account for 10% of the urban wage premium and 2% of agglomeration.
- JEL Code:
- J11,J31,J42,R23
- 12 February 2024
-
Working Paper Series - Issue No. 2905Details
- Abstract:
- This paper develops a Bayesian VAR model to identify three structural shocks driving the European gas market: demand, supply and inventory shocks. We document how gas price fluctuations have a heterogeneous pass-through to euro area prices depending on the underlying shock driving them. The pass-through is stronger and more persistent when gas prices are driven by aggregate demand or supply pressures, while inventory shocks have a weaker impact. Supply shocks, moreover, are found to pass through to all components of euro area inflation – producer prices, wages and core inflation, which has implications for monetary policy. We finally document how the response of gas prices to shocks is non-linear and is significantly magnified in periods of low unemployment.
- JEL Code:
- C50,C54,E30,E31,Q43
- 12 February 2024
-
Other publication
- 12 February 2024
-
SpeechDetails
- Subtitle:
- Keynote speech by Philip R. Lane, Member of the Executive Board of the ECB, at the joint Banco de España, Irving Fisher Committee on Central Bank Statistics and European Central Bank conference “External statistics after the pandemic: addressing novel analytical challenges” in Madrid
- 9 February 2024
-
SpeechDetails
- Subtitle:
- Keynote speech by Piero Cipollone, Member of the Executive Board of the ECB, at the 30th Annual Congress of Financial Market Professionals organised by Assiom Forex
- 8 February 2024
-
SpeechDetails
- Subtitle:
- Speech by Philip R. Lane, member of the Executive Board of the ECB, Hutchins Center on Fiscal & Monetary Policy at the Brookings Institution
- 8 February 2024
- 8 February 2024
-
Working Paper Series - Issue No. 2904Details
- Abstract:
- We study the redistributive effects of surprise inflation combining administrative bank data with an information provision experiment during an episode of historic inflation. On average, households are well-informed about prevailing inflation and are concerned about its impact on their wealth; yet, while many households know about inflation eroding nominal assets, most are unaware of nominal-debt erosion. Once they receive information on the debt-erosion channel, households view nominal debt more positively and increase estimates of their own real net wealth. These changes causally affect actual consumption and hypothetical debt decisions. Our findings suggest that real wealth mediates the sensitivity of consumption to inflation once households are aware of the wealth effects of inflation
- JEL Code:
- D12,D14,D83,D84,E21,E31,E52
- Network:
- ECB Lamfalussy Fellowship Programme
- 8 February 2024
-
Working Paper Series - Issue No. 2903Details
- Abstract:
- Policymakers around the world are encouraging the local production of key inputs to reduce risks from excessive dependencies on foreign suppliers. We analyse the macroeconomic effects of supply chain reorientation through localisation policies, using a global dynamic general equilibrium model. We proxy non-tariff measures, such as the stricter enforcement of regulatory standards, which reduce import quantity but do not directly alter costs and prices. These measures have, so far, been a key component of attempts to reshore production and are an increasingly popular trade policy instrument in general. Focusing on the euro area, we find that localisation policies are inflationary, imply transition costs and generally have a negative long-run effect on aggregate domestic output. The size (and sign) of the impact depends on whether these policies are implemented unilaterally or induce a retaliation from trade partners, and the extent to which they reduce domestic competition and productivity. We provide some recommendations for policymakers considering implementing a localisation agenda.
- JEL Code:
- F13,F41,F45,F62
- 8 February 2024
-
The ECB BlogDetails
- JEL Code:
- G20,G24,E50,E58
- Subtitle:
- The Eurosystem has accepted Scope as a new rating agency alongside Fitch, Moody's, S&P and DBRS. This has a number of implications, including a wider range of credit opinions and expertise being considered for monetary policy purposes. The ECB Blog explains.
- 8 February 2024
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Economic Bulletin
- 8 February 2024
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Economic Bulletin - BoxEconomic Bulletin Issue 1, 2024Details
- Abstract:
- This box provides updated estimates of the euro area discretionary fiscal measures related to the support provided by euro area governments in response to the energy crisis and high inflation. It also discusses how these measures relate to climate change in the context of the December 2023 Eurosystem staff macroeconomic projections.
- JEL Code:
- E62,E31,E63
- 8 February 2024
-
Economic Bulletin - BoxEconomic Bulletin Issue 1, 2024Details
- Abstract:
- Financial markets and analysts significantly underestimated the pace and size of the recent increases in the key ECB interest rates. This box measures the size and dynamics of policy expectation errors. Based on information from the ECB’s Survey of Monetary Analysts, it suggests that these expectation errors were driven mainly by revisions to macroeconomic expectations, indicating that analysts perceived a broadly consistent policy reaction to macroeconomic developments.
- JEL Code:
- E52,E44,G12
- 8 February 2024
-
Economic Bulletin - BoxEconomic Bulletin Issue 1, 2024Details
- Abstract:
- Historically, the financial vulnerability indicator based on the Survey on the Access to Finance of Enterprises (SAFE) evolves broadly in line with bankruptcies and other insolvency measures for firms in the euro area. The current rise in vulnerabilities identified in the SAFE is driven mostly by firms in industry, construction and trade and by large firms rather than by small and medium-sized enterprises (SMEs). Increasing interest expenses are important in explaining the likelihood of firms becoming vulnerable. Balance sheet data on firms in the SAFE confirm that corporate vulnerabilities have implications for their investment rate and employment growth. This provides further insights into the transmission of monetary policy to economic activity.
- JEL Code:
- D22,G33,E52
- 8 February 2024
-
Economic Bulletin - BoxEconomic Bulletin Issue 1, 2024Details
- Abstract:
- Purchasing Managers’ Index (PMI) surveys are insightful because PMIs are released in advance of official hard data and are typically strongly correlated with these. This Box reports that after losing some predictive capacity during pandemic-related lockdowns and reopenings, the euro area composite output PMI is once again a reliable timely indicator for nowcasting euro area real GDP growth.
- JEL Code:
- E32,E37
- 8 February 2024
-
Economic Bulletin - BoxEconomic Bulletin Issue 1, 2024Details
- Abstract:
- The pandemic triggered the deepest global recession (albeit short-lived) since the Second World War amid large-scale policy support, and led to a sweeping fall in world trade. Following the initial COVID-19 shock, trade staged a rapid recovery, but from the second half of 2022 world trade growth started to decelerate markedly and in 2023 it is estimated to have been considerably below its pre-pandemic average. This box reviews the factors behind the buoyant recovery of global trade following the initial COVID-19 shock and the reasons for its lacklustre performance in 2023, finding that the latter mainly reflects the unwinding of some specific post-pandemic factors (e.g. the rotation of demand from trade-intensive goods towards services owing to the full relaxation of pandemic containment measures) and a less trade-friendly composition of global activity.
- JEL Code:
- F01,F1,F4
- 8 February 2024
-
Economic Bulletin - BoxEconomic Bulletin Issue 1, 2024Details
- Abstract:
- Emission reduction measures have been adopted at both country and European Union (EU) levels. This box assesses the impact on euro area real GDP and inflation of green fiscal discretionary measures as included in the December 2023 Eurosystem staff macroeconomic projections. Since these measures are unlikely to be sufficient to fully achieve the EU targets for emission reduction, energy efficiency and renewable energy production, model simulations are used to illustrate the medium-term impact of alternative transition policy scenarios. These simulations suggest modest downside risks to GDP and upside risks to inflation from transition policies to achieve EU targets, but the effects depend on the transition policy mix.
- JEL Code:
- E3,E62,Q48
- 7 February 2024
-
Occasional Paper Series - Issue No. 338Details
- Abstract:
- This paper introduces innovative, newly developed forward-looking indicators of negotiated wage growth in the euro area using data on collective bargaining agreements from seven countries: Germany, France, Italy, Spain, the Netherlands, Austria and Greece. The paper demonstrates how agreement-level data can be used to study drivers of aggregate negotiated wage growth, as well as monitor the breadth of wage increases and account for time-varying factors such as one-off payments, when assessing wage pressures. Lastly, the paper shows that the new indicators can provide reliable signals about current and future developments of wage pressures in the euro area while also serving as important cross-checking tools for negotiated wage growth forecasts.
- JEL Code:
- E24,J31,J50
- 7 February 2024
-
Economic Bulletin - BoxEconomic Bulletin Issue 1, 2024Details
- Abstract:
- The natural rate of interest is defined as the real rate of interest that is neither expansionary nor contractionary. r* is unobservable and its estimation is fraught with a host of measurement and model-specification challenges. A wide range of estimates obtained from a suite of models and approaches suggests that cyclical measures of euro area r* have been edging higher recently. Yet slow-moving estimates anchored to long-run economic trends are unlikely to have risen measurably.
- JEL Code:
- E43,E52
- 7 February 2024
-
InterviewDetails
- Subtitle:
- Interview with Isabel Schnabel, Member of the Executive Board of the ECB, conducted by Martin Arnold on 2 February 2024
- 6 February 2024
-
Weekly financial statementAnnexes
- 6 February 2024
-
Weekly financial statement - Commentary
- 6 February 2024
-
Press release
- 6 February 2024
-
Consumer Expectation Survey
- 6 February 2024
-
Consumer Expectation Survey
- 6 February 2024
-
Consumer Expectation Survey
- 6 February 2024
-
Consumer Expectation Survey
- 5 February 2024
-
Working Paper Series - Issue No. 2902Details
- Abstract:
- In this paper we build a unique dataset to study how banks decide which firms to lend to and how this decision depends on their own situation and the characteristics of their borrowers. We find that weaker capitalised banks adjust their credit standards more than healthier banks, especially for firms with a higher default risk. We also show how credit standards change in reaction to two specific macroeconomic developments, namely an increase in bank funding costs and a sudden deterioration in banks’ corporate loan portfolios. Here we find that weaker banks respond more forcefully by tightening their credit standards more than better capitalised banks. This development is particularly pronounced when banks are linked to riskier firms. Insofar, we provide evidence of heterogeneity in the bank lending channel, depending on the situation of the lenders and the borrowers.
- JEL Code:
- E44,E51,E52,G21
- 5 February 2024
-
Economic Bulletin - ArticleEconomic Bulletin Issue 1, 2024Details
- Abstract:
- Retail payments are undergoing profound changes that are reshaping the European payments landscape. The retail payments ecosystem and consumers’ attitudes and preferences are evolving and influencing one another. To address these changes, the Eurosystem has devised a multi-faceted policy response to ensure the safety and efficiency of the euro retail payments market as well as people’s continued access to public money in the form of cash and, potentially, in a digital form.
- JEL Code:
- E42
- 3 February 2024
-
InterviewDetails
- Subtitle:
- Interview with Frank Elderson, Member of the Executive Board of the ECB and Vice-Chair of the Supervisory Board of the ECB, conducted by Jonathan Witteman on 29 January 2024
- 2 February 2024
- 2 February 2024
-
Other publication
- 2 February 2024
-
Press releaseRelated
- 2 February 2024
- 2 February 2024
-
Survey on credit terms and conditions in euro-denominated securities financing and OTC derivatives marketsAnnexes
- 2 February 2024
-
Other publication
- 1 February 2024
-
Working Paper Series - Issue No. 2901Details
- Abstract:
- Commodity prices co-move, but the strength of this co-movement changes over time due to structural factors, like changing energy intensity in production and consumption as well as changing composition of underlying shocks. This paper explores whether econometric models that exploit this co-movement and account for parameter instability provide more accurate point and density forecasts of ten major commodity indices viz-a-viz constant coefficient models. Improvements in point forecast accuracy are small, with predictability varying substantially across forecast horizons and commodity indices, but they are large and significant in terms of density forecasting. An economic evaluation reveals that allowing for parameter time variation and commonalities leads to higher portfolios returns, and to higher utility values for investors.
- JEL Code:
- C32,C52,C53,C55,E37
- 1 February 2024
-
SpeechDetails
- Subtitle:
- Slides by Philip R. Lane, Member of the Executive Board of the ECB, at the seminar at Einaudi Institute for Economics and Finance (EIEF) in Rome
- 1 February 2024
-
Disaggregated financial statement
- 1 February 2024
-
T2S Harmonisation progress report
- 1 February 2024
-
MFI interest rate statistics
- 1 February 2024
-
€STR Transparency on errors
- 31 January 2024
-
Occasional Paper Series - Issue No. 337Details
- Abstract:
- In the low inflation and low interest rate environment that prevailed over the period 2013-2020, many argued that besides expansionary monetary policy, expansionary fiscal policy could also support central banks’ efforts to bring inflation closer to target. During the pandemic, proper alignment of fiscal and monetary policy was again crucial in promoting a rapid macroeconomic recovery. Since the end of 2021 an environment of higher inflation, lower growth, higher uncertainty, and higher interest rates has changed the nature of the required policy mix and poses different challenges to the interaction between monetary and fiscal policy. Following up on the work done under the ECB’s 2020 strategy review (see Debrun et al., 2021), this report explores some of the renewed challenges to monetary and fiscal policy interactions in an environment of high inflation. The main general conclusion is that, with an independent monetary policy that aims to bring inflation back to target in a timely manner, it is still possible to design fiscal policy in a way that protects vulnerable parts of society against the costs of high inflation without pulling against the central bank’s effort to tame inflation. This is more likely to be the case if fiscal measures are temporary and targeted, and if priority is given to structural reforms and public investment in support of potential growth. The latter is particularly effective in reshaping the supply side of the economy in a manner that is likely to have a lasting positive structural impact.
- JEL Code:
- E22,E52,E58,E62
- 31 January 2024
-
InterviewDetails
- Subtitle:
- Interview with Luis de Guindos, Vice-President of the ECB, conducted by Kolja Rudzio
- 31 January 2024
-
Working Paper Series - Issue No. 2900Details
- Abstract:
- This paper exploits daily infrared images taken from satellites to track economic activity in advanced and emerging countries. We first develop a framework to read, clean, and exploit satellite images. Our algorithm uses the laws of physics (Planck’s law) and machine learning to detect the heat produced by cement plants in activity. This allows us to monitor in real-time whether a cement plant is working. Using this information on around 500 plants, we construct a satellite-based index tracking activity. We show that using this satellite index outperforms benchmark models and alternative indicators for nowcasting the production of the cement industry as well as the activity in the construction sector. Comparing across methods, we find neural networks yields significantly more accurate predictions as they allow to exploit the granularity of our daily and plant-level data. Overall, we show that combining satellite images and machine learning allows to track economic activity accurately.
- JEL Code:
- C51,C81,E23,E37
- 31 January 2024
-
Working Paper Series - Issue No. 2899Details
- Abstract:
- The European Union plays a prominent role in climate regulations initiatives, this commitment likely implies that climate risk premiums look different in Europe compared to the rest of the world. This paper examines the pricing implications of climate risks in euro area corporate bond markets, focusing on physical and transition risk. Using climate news as a gauge for systematic climate risk, we find a significant pricing effect of physical risk in long-term bonds, with investors demanding higher returns on bonds exposed to physical risk shocks. The estimated physical risk premium is 34 basis points, indicating increased awareness and hedging demand after the Paris Agreement. Transition risk premiums are smaller and less significant, reflecting the ongoing transition to a low-carbon economy. Our findings contribute to understanding climate risk pricing in the European bond markets, highlighting the importance of physical risk and the evolving nature of investor demand for climate-resilient assets.
- JEL Code:
- G12,G14,G28,Q51,Q54
- 31 January 2024
-
Payment instruments and systemsAnnexes
- 31 January 2024
-
Payment instruments and systems
- 30 January 2024
-
Weekly financial statementAnnexes
- 30 January 2024
-
Weekly financial statement - Commentary
- 30 January 2024
- 30 January 2024
-
Press releaseAnnexes
- 30 January 2024
-
Press release
- 30 January 2024
-
Working Paper Series - Issue No. 2898Details
- Abstract:
- This paper studies the nature, evolution, and sources of inflation heterogeneity across households in France and Germany. Inflation differences are large and persistent. The two main sources of inflation heterogeneity are spatial differences in the prices paid for the same product and differences in the household-specific variety choice within a category. Income heterogeneity by itself is not a relevant determinant of inflation heterogeneity, but due to its correlation with household behaviour, a significant and timevarying inflation difference between income groups emerges. Substitution is strongly behaviour-driven and largely detached from the relative price. The dispersion of the household-level elasticity of substitution does not fully account for the heterogeneity of substitution behaviour. Substitution does not reduce the dispersion of inflation, confirming the central role of preference heterogeneity in inflation measurement.
- JEL Code:
- D12,D30,E31,F45
- Network:
- Price-setting Microdata Analysis Network (PRISMA)
- 30 January 2024
-
Working Paper Series - Issue No. 2897Details
- Abstract:
- We analyse the impact of macroeconomic and monetary policy shocks on corporate credit risk as measured by firms’ probabilities of default (PDs) for the four largest euro area countries. We estimate the impact of shocks on one-year PDs using local projections (LP). For the period 2014-19, we find that aggregate shocks significantly affect the dynamics of credit risk. An adverse supply shock leads to a deterioration of firms’ riskiness 10 per cent above the average PD. Contractionary monetary policy shocks exert similar, but delayed effects. Firms’ responses to shocks vary depending on their characteristics and degree of financial constraints. Smaller firms are affected to a larger degree. Firms’ outstanding indebtedness and debt repayment capacity are an important transmission channel for aggregate shocks, but the accumulation of cash reserves helps building resilience.
- JEL Code:
- C23,C55,E43,E52,G33
- 29 January 2024
-
Working Paper Series - Issue No. 2896Details
- Abstract:
- I study the transmission of monetary policy to deposit rates in the euro area with a focus on asymmetries and the role of banking sector concentration. Using a local projections framework with 2003-2023 country-level and bank-level data for thirteen euro area member states, I find that deposit rates respond symmetrically to an unexpected tightening or easing of monetary policy. However, more concentrated domestic banking sectors do pass-on unexpected monetary tightening (easing) more slowly (quickly) than less concentrated banking sectors, which contributes to a temporary divergence of deposit rates across the euro area. These results suggest that heterogeneity in the degree of banking sector concentration matters for the transmission of monetary policy to deposit rates, which in turn may affect banking sector profitability.
- JEL Code:
- D40,E43,E52,G21
- 29 January 2024
-
Working Paper Series - Issue No. 2895Details
- Abstract:
- This paper investigates the importance of including data on new housing supply in Dynamic Stochastic General Equilibrium (DSGE) models in forecasting the Great Financial Crisis (GFC), focusing on the U.S. While existing models have added a financial sector and real estate sector, they have largely overlooked housing supply. I develop an extended DSGE model that includes both the financial sector and endogenous housing supply and show that forecasting accuracy significantly improves when data on new houses is included. Robustness checks confirm the importance of these additions to the model. The findings highlight the necessity of combining model extension and housing supply data for accurate forecasting during economic crises. I identify negative housing demand shocks and escalating adjustment costs as primary drivers of the GFC, propagating into the real economy and accelerating through the financial sector. Additionally, this paper addresses the zero lower bound challenge in modeling forward guidance using a regime change approach.
- JEL Code:
- E17,E32,E37,R21,R31
- 29 January 2024
-
The ECB BlogDetails
- Subtitle:
- The ECB can lend euro to non-euro area central banks to reduce the risk of financial stress spilling over to the euro area. Piero Cipollone, Philip Lane and Isabel Schnabel explain how we have made such liquidity lines more effective and agile.
- 29 January 2024
-
Press release
- 29 January 2024
-
Survey of Monetary Analysts - Aggregate results
- 29 January 2024
-
Research Bulletin - Issue No. 115Details
- Abstract:
- When inflationary pressures started intensifying in 2022, the world’s major central banks faced a dilemma. They could rapidly tighten monetary policy at the risk of fuelling financial distress after years of ultra-low interest rates and balance sheet expansion. Or they could take a more gradual approach to fighting inflation that would protect the financial system, but risk high inflation becoming entrenched. While severe financial instability may be an unlikely event (or “tail risk”), it can have devastating macroeconomic consequences. Quantifying financial stability trade-offs therefore requires a way to gauge the three-way interaction between monetary policy, financial stability conditions and tail risks to the economy.
- JEL Code:
- C32,E37,E44,E52,G01
- 26 January 2024
- 26 January 2024
-
Governing Council decisions - Other decisions
- 26 January 2024
-
Working Paper Series - Issue No. 2894Details
- Abstract:
- It has been widely documented that households experience different inflation rates which are generally concealed in aggregate price indices. Using scanner data from a large household panel for Austria, we analyse price dynamics faced by individual households and try to explain the causes for the observed inflation differences. Considering not only consumption shares but also the specific product prices paid by households, we find a considerable and persistent degree of heterogeneity among household inflation rates. These are also quite variable over time, resulting from varying consumption baskets and active product substitution, allowing households to reduce their inflation exposure substantially. Factors like age and shopping behavior of households explain some of the inflation differences, whereas income does not seem to have a notable influence in normal times. However, during high inflation periods, the lowest income group is found to face higher inflation rates than other income groups.
- JEL Code:
- D12,D30,E31
- Network:
- Price-setting Microdata Analysis Network (PRISMA)
- 26 January 2024
-
Working Paper Series - Issue No. 2893Details
- Abstract:
- Using microdata from a U.S. household survey, we document that immigrants who lived through a sovereign default episode are 6% less likely to hold debt relative to otherwise similar immigrants who reside in the same U.S. state and come from the same foreign country but who did not experience a default. Conditional on holding debt, consumers in the former group borrow less and service lower debt burdens. The negative effect on borrowing behavior of having experienced a sovereign default increases with family size and declines with education. These findings highlight the role of personal experience in shaping households’ financial decisions.
- JEL Code:
- G11,G51,H63,D83
- 26 January 2024
-
Euro area economic and financial developments by institutional sector (full)
- 26 January 2024
-
Other publicationDetails
- Subtitle:
- Selected validation checks performed in AnaCredit datasets
- 26 January 2024
-
Monetary developments in the euro areaAnnexes
- 25 January 2024
-
Monetary developments in the euro area
- 26 January 2024
-
Press releaseRelated
- 26 January 2024
-
Survey of Professional Forecasters
- 26 January 2024
-
Survey of Professional ForecastersAnnexes
- 26 January 2024
Related- 26 January 2024
- 26 January 2024
-
Economic Bulletin - BoxEconomic Bulletin Issue 1, 2024Details
- Abstract:
- This box summarises the findings of recent contacts between ECB staff and representatives of 70 leading non-financial companies operating in the euro area. According to these exchanges, which took place between 2 and 10 January 2024, aggregate activity is likely to have stagnated or contracted slightly in the fourth quarter of 2023 and was expected to remain stable or grow only very modestly in the first quarter of 2024. Widespread uncertainty was said to be holding back recovery and the employment outlook deteriorating. Growth in selling prices remained moderate in the fourth quarter of 2023, with some further moderation expected in the short term amid stable or declining non-labour costs and an anticipated easing of wage growth.
- JEL Code:
- E2,E3,L2
- 25 January 2024
-
PodcastRelated
- 25 January 2024
-
Monetary policy statement
- 25 January 2024
-
Combined monetary policy decisions and statementRelated
- 25 January 2024
-
Monetary policy statement
- 25 January 2024
-
Monetary policy decision
- 25 January 2024
-
Monetary policy statementDetails
- Subtitle:
- Christine Lagarde, President of the ECB, Luis de Guindos, Vice-President of the ECB, Frankfurt am Main, 25 January 2024
Related- 25 January 2024
-
Combined monetary policy decisions and statement
- 25 January 2024
- 25 January 2024
-
Monetary policy decision
- 25 January 2024
-
Monetary policy decisionRelated
- 25 January 2024
-
Combined monetary policy decisions and statement
- 25 January 2024
-
Monetary policy statement
- 22 February 2024
-
Monetary policy account
- 23 January 2024
- 23 January 2024
-
Weekly financial statementAnnexes
- 23 January 2024
-
Weekly financial statement - Commentary
- 23 January 2024
-
Press releaseRelated
- 23 January 2024
-
Euro area bank lending survey
- 23 January 2024
-
Euro area bank lending surveyAnnexes
- 23 January 2024
-
Euro area bank lending survey - Annex
Related- 23 January 2024
-
Press release
- 22 January 2024
-
InterviewDetails
- Subtitle:
- Contribution by Christine Lagarde, President of the ECB, French and German members of parliament and other personalities, published on n-tv.de
- 18 January 2024
-
Monetary policy accountRelated
- 14 December 2023
-
Monetary policy decision
- 18 January 2024
-
Balance of payments (monthly)
- 17 January 2024
-
Working Paper Series - Issue No. 2892Details
- Abstract:
- The euro area insurance sector and its relevance for real economy financing have grown significantly over the last two decades. This paper analyses the effects of monetary policy on the size and composition of insurers’ balance sheets, as well as the implications of these effects for financial stability. We find that changes in monetary policy have a significant impact on both sector size and risk-taking. Insurers’ balance sheets grow materially after a monetary loosening, implying an increase of the sector’s financial intermediation capacity and an active transmission of monetary policy through the insurance sector. We also find evidence of portfolio re-balancing consistent with the risk-taking channel of monetary policy. After a monetary loosening, insurers increase credit, liquidity and duration risk-taking in their asset portfolios. Our results suggest that extended periods of low interest rates lead to rising financial stability risks among non-bank financial intermediaries.
- JEL Code:
- E52,G11,G22,G23
- Network:
- Challenges for Monetary Policy Transmission in a Changing World Network (ChaMP)
- 17 January 2024
-
Working Paper Series - Issue No. 2891Details
- Abstract:
- We study how shocks to corporate leverage alter the macroeconomic transmission of monetary policy. We identify leverage shocks as idiosyncratic firm-level disturbances that are aggregated up to a size-weighted country-level average to generate a Granular Instrumental Variable (Gabaix and Koijen, forthcoming). Interacting this instrumental variable with high-frequency identified monetary policy shocks, we find that transmission to the price level strengthens in the presence of leverage shocks, while the real effects of monetary policy are unaffected. We show that this disconnect can be rationalized with an internal devaluationchannel. Economies experiencing an increase in leverage exhibit a stronger monetary policy-induced contraction in domestic demand. This, however, is counteracted by a weaker contraction in exports, facilitated by their improved price competitiveness.
- JEL Code:
- C36,E22,E52
- 17 January 2024
-
SpeechDetails
- Subtitle:
- Introductory remarks by Piero Cipollone, Member of the Executive Board of the ECB, at the ninth meeting of the Euro Cyber Resilience Board for pan-European Financial Infrastructures
- 16 January 2024
-
Weekly financial statementAnnexes
- 16 January 2024
-
Weekly financial statement - Commentary
- 16 January 2024
-
Working Paper Series - Issue No. 2890Details
- Abstract:
- This paper analyzes the link between monetary policy and capital misallocation in a New Keynesian model with heterogeneous firms and financial frictions. In the model, firms with a high return to capital increase their investment more strongly in response to a monetary policy expansion, thus reducing misallocation. This feature creates a new time-inconsistent incentive for the central bank to engineer an unexpected monetary expansion to temporarily reduce misallocation. However, price stability is the optimal timeless response to demand, financial or TFP shocks. Finally, we present firm-level evidence supporting the theoretical mechanism.
- JEL Code:
- E12,E22,E43,E52,L11
- Network:
- Challenges for Monetary Policy Transmission in a Changing World Network (ChaMP)
- 16 January 2024
-
Working Paper Series - Issue No. 2889Details
- Abstract:
- What are the macroeconomic consequences of a government that is limited in its willingness or ability to raise primary surpluses, and a central bank that accommodates its interest-rate policy to the fiscal conditions? I address this question in a dynamic stochastic sticky-price model with endogenous shifts between an “orthodox” and a “fiscally-dominant” policy regime. The risk of future regime shifts has encompassing effects on equilibrium. Inflation is systematically higher than it would be if fiscal policy always adjusted its primary surplus sufficiently and monetary policy was solely concerned with price stability. This inflation bias is increasing in the real value of government debt. Regime-switching probabilities are not invariant to policy. The central bank can attenuate the risk of a shift to the fiscally-dominant regime by raising the real interest rate sufficiently moderately when inflation increases. Lower fiscal dominance risk, in turn, mitigates the inflation bias.
- JEL Code:
- E31,E52,E62,E63
- 16 January 2024
-
Press release
- 16 January 2024
-
Consumer Expectation Survey
- 16 January 2024
-
Consumer Expectation Survey
- 16 January 2024
-
Consumer Expectation Survey
- 16 January 2024
-
Consumer Expectation Survey
- 15 January 2024
-
Working Paper Series - Issue No. 2888Details
- Abstract:
- This paper shows the existence of a central bank trilemma. When a central bank is involved in financial intermediation, either directly through a central bank digital currency (CBDC) or indirectly through other policy instruments, it can only achieve at most two of three objectives: a socially eÿcient allocation, financial stability (i.e., absence of runs), and price stability. In particular, a commitment to price stability can cause a run on the central bank. Implementation of the socially optimal allocation requires a commitment to inflation. We illustrate this idea through a nominal version of the Diamond and Dybvig (1983) model. Our perspective may be particularly appropriate when CBDCs are introduced on a wide scale.
- JEL Code:
- E58,G21
- Network:
- ECB Lamfalussy Fellowship Programme
- 15 January 2024
-
Working Paper Series - Issue No. 2887Details
- Abstract:
- Rapid and large deposit outflows from banks have regained attention in the context of the March 2023 demises of Credit Suisse, SVB and other regional US banks. Moreover, the possible introduction of CBDC or a marked success of stablecoins are perceived as additional clouds over the future of deposit funding. While the bank run literature rarely pays attention to where bank deposits can flow to, this paper distinguishes the different flow of funds mechanics across all possible destinations and reviews for each the current and prospective future factors that may contribute to the observed increase of the speed and size of bank runs. While some of these factors can be contained through policy measures, others, like the intensified competition between banks will inevitably stay, and bank balance sheet management and liquidity regulation need to accept the new normal of somewhat less stable and more expensive sight deposits.
- JEL Code:
- E42,E51,G21,G23
- 13 January 2024
-
InterviewDetails
- Subtitle:
- Interview with Philip R. Lane, Member of the Executive Board of the ECB, conducted by Federico Fubini
- 12 January 2024
- 12 January 2024
- 12 January 2024
-
SpeechDetails
- Subtitle:
- Slides by Philip R. Lane, Member of the Executive Board of the ECB, at the REBUILD Annual Conference - Post-Pandemic Economic Governance and Next Generation EU in Dublin
- 11 January 2024
-
Euro area economic and financial developments by institutional sector (early)
- 11 January 2024
-
Balance of payments (quarterly)
- 11 January 2024
-
Economic Bulletin
- 11 January 2024
-
Economic Bulletin - BoxEconomic Bulletin Issue 8, 2023Details
- Abstract:
- This box analyses recent developments in the net interest income of households and firms in the euro area as a whole and in the largest euro area countries, against the backdrop of rising interest rates. Net interest income is a direct channel through which the ECB transmits policy rate changes to savers and borrowers. Over the last decade net interest income has been negative for households and firms at the aggregate sectoral level. Interest-bearing assets, which affect the interest received by households and firms, and liabilities, which affect interest paid, are important drivers of developments in net interest income. Individual countries demonstrate striking differences in net interest income and interest-bearing assets and liabilities, largely due to specific structural factors.
- JEL Code:
- E01,E43,E52
- 11 January 2024
-
Economic Bulletin - BoxEconomic Bulletin Issue 8, 2023Details
- Abstract:
- This box describes liquidity conditions and the Eurosystem’s monetary policy operations during the fifth and sixth maintenance periods of 2023, from 2 August to 31 October 2023.
- JEL Code:
- E40,E52,E58
- 11 January 2024
-
Economic Bulletin - BoxEconomic Bulletin Issue 8, 2023Details
- Abstract:
- The disposable income of households, as measured in the national accounts, benefited from rising labour income and continued strong growth in non-labour income in the first half of 2023. But not all components of income generate a positive cash flow for households. This mainly concerns non-labour income (excluding net fiscal income), which benefited from the exceptionally strong growth in gross operating surplus and the strong increase in financial intermediation services indirectly measured (FISIM). These two components do not generate positive cash flow for households and may therefore not be reflected in households’ income perceptions, which recently lagged behind the positive income developments as measured in the national accounts. One indicator of growth in household income that comes closer to household perceptions is compensation of employees. Looking ahead, the negative assessment by households of recent real income growth appears to be consistent with the muted outlook for private consumption.
- JEL Code:
- E22,E32
- 11 January 2024
-
Economic Bulletin - BoxEconomic Bulletin Issue 8, 2023Details
- Abstract:
- According to the estimates of major international institutions, the euro area output gap remained negative or very close to zero in the aftermath of the pandemic and at the onset of the war in Ukraine, despite the rise in euro area core inflation. This contrasts with most available historical data, which show a positive association of a rise in inflation above its medium-run average with an increase in the output gap. This may reflect the fact that demand shocks have historically had a larger effect on the business cycle relative to supply shocks. However, the shocks that hit the euro area after 2020 – disruptions in supply chains and significant increases in input prices – predominantly came from the supply side of the economy. This box explores how accounting for the role of temporary supply shocks in determining potential output can restore the positive association of the output gap with high inflation after 2020. First, the box discusses the concept of potential output as used by most international organisations. It then looks at indicators that could capture recent exceptional demand and supply conditions. Lastly, using information on these indicators, the box proposes complementary slack measures that better reflect inflationary pressures in times of temporary supply shocks.
- JEL Code:
- E31,E32,E37,E58
- 11 January 2024
-
Economic Bulletin - BoxEconomic Bulletin Issue 8, 2023Details
- Abstract:
- The US Treasury securities market is the largest and most liquid in the world. Recently, however, its liquidity has declined owing to a combination of factors, including monetary policy tightening and elevated uncertainty about inflation and growth. At the same time, leveraged funds have built up unusually large net short positions in the US Treasury futures market. This box provides empirical evidence that the impact of a US monetary policy shock on domestic and global bond markets may vary depending on conditions in the US Treasury market. Specifically, the results suggest that the effect of a US monetary policy shock might be stronger when market liquidity is low or when net short positions of leveraged funds are large.
- JEL Code:
- E5,F3,G1
- 10 January 2024
-
InterviewDetails
- Subtitle:
- Interview with Isabel Schnabel, Member of the Executive Board of the ECB, conducted and published on 10 January 2024
- 10 January 2024
-
Working Paper Series - Issue No. 2886Details
- Abstract:
- Bank market power, both in the loan and deposit market, has important implications for credit provision and for financial stability. This article discusses these issues through the lens of a simple theoretical framework. On the asset side, banks choose the quality and quantity of loans. On the liability side, they may be subject to depositor runs whenever they offer demandable contracts. Thisstructure allows us to review the literature on the role of market power for credit provision and stability and also highlight the interactions between the two sides of banks’ balance sheets. Our approach identifies relevant channels that deserve further analysis, especially given the rising importance of bank market power for monetary policy transmission and the rise of the digital economy.
- JEL Code:
- G01,G21,G28
- 10 January 2024
-
Working Paper Series - Issue No. 2885Details
- Abstract:
- The control of carbon emissions by policymakers poses the corporate challenge of developing an optimal carbon management policy. We provide a unified model that characterizes how firms should optimally manage emissions through production, green investment, and the trading of carbon credits. We show that carbon pricing reduces firms’ emissions but also induces firms to tilt towards more immediate yet transient types of green investment—such as abatement as opposed to innovation—as it becomes costlier to comply. Green innovation subsidies mitigate this effect and complement carbon pricing in ensuring innovation-driven sustainability. Perhaps surprisingly, we show that carbon regulation need not reduce firm value.
- JEL Code:
- G30,G31,G12,D62,O33
- 10 January 2024
-
Economic Bulletin - BoxEconomic Bulletin Issue 8, 2023Details
- Abstract:
- The current monetary policy tightening cycle has led to increases in bank deposit rates, albeit to a lesser extent than in the past. In part this reflects the transition from negative interest rates to rates well into positive territory. When interest rates were very low, spreads between deposit and policy rates became compressed or even negative, as banks were reluctant to charge negative rates to their retail depositors. Consequently, some time was needed in the initial phase of the current tightening cycle for spreads to normalise. During that period, policy rate hikes were matched by only minor increases in deposit rates. The current round of monetary policy tightening has had an impact on portfolio allocation by incentivising shifts from overnight deposits to time deposits and bonds. It has also weakened money creation by (i) bringing credit expansion to a halt, (ii) reabsorbing money in circulation as the Eurosystem’s monetary policy portfolio contracts, and (iii) leading banks to repay central bank funding and replace it with long-term bonds. Both portfolio shifts and the contractionary monetary dynamics have resulted in negative growth rates of unprecedented size for M1 and M3.
- JEL Code:
- E41,E43,E44,E51,E58,G11
- 10 January 2024
-
SpeechDetails
- Subtitle:
- Speech by Luis de Guindos, Vice-President of the ECB, at the 14th edition of Spain Investors Day
- 10 January 2024
-
The ECB BlogDetails
- JEL Code:
- E31,F62,O52,O51,O11,N24
- Subtitle:
- Within the euro area, countries in central and eastern Europe have recently experienced the highest inflation rates. But why, exactly? The ECB Blog looks at the reasons for these higher prices and highlights the resulting risks and vulnerabilities.
- 9 January 2024
-
Weekly financial statementAnnexes
- 9 January 2024
-
Weekly financial statement - Commentary
- 9 January 2024
-
Working Paper Series - Issue No. 2884Details
- Abstract:
- We identify jointly supply chain disruptions shocks and energy supply shocks together with demand shocks using a structural BVAR with narrative restrictions. The impact of adverse supply chain disruption shocks on inflation expectations and core HICP is strong and rather persistent, while the impact is small and transitory after energy supply shocks. Supply chain disruption shocks and favourable demand shocks explain the large faction of output fluctuations in the 2020-2022 period. The dynamics of core prices and inflation expectations are instead mostly explained by supply chain disruption shocks and to a lesser extent by adverse energy supply shocks.
- JEL Code:
- C32,E32
- 9 January 2024
-
Economic Bulletin - BoxEconomic Bulletin Issue 8, 2023Details
- Abstract:
- Manufacturing activity has been weak since the end of 2021, while market services activity has started to slow down more recently. This box uses a lead-lag analysis to examine how developments in manufacturing are correlated with services activity. It then assesses the implications of the recent monetary policy tightening for the near-term outlook across sectors through the lens of an empirical model. The lead-lag analysis shows that current dynamics in manufacturing contain information for near-term dynamics in services activity. The model-based assessment shows that monetary policy shocks have a larger and faster impact on manufacturing than on services and are consistent with a broadening of the impact of monetary policy tightening across sectors during 2023.
- JEL Code:
- C11,E32,E52
- 9 January 2024
-
Economic Bulletin - BoxEconomic Bulletin Issue 8, 2023Details
- Abstract:
- The reaction of oil prices to geopolitical shocks depends on the country of origin. Empirical analysis suggests that instances of rising geopolitical tensions generally put downward pressure on oil prices, reflecting weaker global demand on the back of lower economic activity. However, geopolitical events in some major oil-producing countries may lead to increases in oil prices amid expectations by market participants of disruptions to future oil supply. Oil price pressures arising from these adverse shocks are typically short-lived and disappear after one quarter. However, recent heightened geopolitical uncertainty stresses the need to identify the nature of these shocks to disentangle their effects on oil prices and inflation.
- JEL Code:
- Q02,F01,F51
- 8 January 2024
- 8 January 2024
-
Economic Bulletin - ArticleEconomic Bulletin Issue 8, 2023Details
- Abstract:
- Through its TARGET Services, the Eurosystem facilitates the settlement of wholesale financial transactions in central bank money, the safest and most liquid settlement asset. Settling such transactions in central bank money helps to reduce risks to the financial system and to support financial stability and trust in the currency. The Eurosystem is continuously modernising its settlement infrastructures and adapting to changing user needs. In line with its commitment to provide settlement in central bank money via infrastructures that are fit for purpose – that is, to enable safe and efficient settlement services that meet the needs of their users – the Eurosystem has recently started analysing the impact of the emergence of new technologies, such as distributed ledger technology (DLT). This article describes the findings from Eurosystem market outreach activities regarding the expected future use of DLT for wholesale financial transactions, discusses possible Eurosystem responses to a significant industry uptake of these new technologies, and outlines the Eurosystem’s plans to further explore how wholesale financial transactions recorded on DLT platforms could be settled in central bank money.
- JEL Code:
- E42,E58
- 8 January 2024
-
Survey of Monetary Analysts
- 5 January 2024
-
MFI interest rate statistics
- 4 January 2024
-
Disaggregated financial statement
- 4 January 2024
-
Weekly financial statementAnnexes
- 4 January 2024
-
Weekly financial statement - Commentary
- 3 January 2024
-
InterviewDetails
- Subtitle:
- Tribute article on Wolfgang Schäuble for Die Zeit by Christine Lagarde, President of the ECB
- 3 January 2024
- 3 January 2024
-
Digital Euro Preparation Phase - Scheme Rulebook Development Group documents
- 2 January 2024
-
Monetary developments in the euro areaAnnexes
- 2 January 2024
-
Monetary developments in the euro area
- 30 December 2023
-
The ECB BlogDetails
- JEL Code:
- E00,E02,E42
- Subtitle:
- 25 years ago, on 1 January 1999, the euro came into force as the single currency for 11 EU Member States. It now serves the economy and eases life for 350 million people in 20 countries.
- 28 December 2023
-
Weekly financial statementAnnexes
- 28 December 2023
-
Weekly financial statement - Commentary
- 22 December 2023
-
InterviewDetails
- Subtitle:
- Interview with Isabel Schnabel, Member of the Executive Board of the ECB, conducted by Meike Schreiber und Markus Zydra on 18 December 2023
- 21 December 2023
-
Press release
- 21 December 2023
-
InterviewDetails
- Subtitle:
- Interview with Luis de Guindos, Vice-President of the ECB, conducted by Emilio Ordiz and Jorge Millán
- 20 December 2023
-
Legal conference proceedings
- 20 December 2023
-
SpeechDetails
- Subtitle:
- Slides by Philip R. Lane, Member of the Executive Board of the ECB, at the seminar organised by the Economic and Social Research Institute in Dublin
- 20 December 2023
-
€STR Annual Methodology Review
- 20 December 2023
-
Balance of payments (monthly)
- 19 December 2023
-
Weekly financial statementAnnexes
- 19 December 2023
-
Weekly financial statement - Commentary
- 19 December 2023
-
Research Bulletin - Issue No. 114Details
- Abstract:
- This column presents evidence on the role that US monetary policy plays in how fiscal spending affects the economy. A dovish Federal Open Market Committee (FOMC) delays policy rate increases, while a hawkish FOMC tightens monetary policy more promptly, following increased fiscal spending. We show that the dovish response supports fiscal expansions. In contrast, the hawkish response results in a GDP decline but effectively controls inflation expectations.
- JEL Code:
- E32,E52,E62,E63,H56
- 18 December 2023
-
Working Paper Series - Issue No. 2883Details
- Abstract:
- The analysis of contagion in financial networks has primarily focused on transmission channels operating through direct linkages. This paper develops a model of financial contagion in the interbank market featuring both direct and indirect transmission mechanisms. The model is used to analyse how shocks originating from outside sectors impact the functioning of the interbank market and investigates the emergence of instability in this setting. We conduct simulations on actual interbank bilateral exposures, constructed manually from a supervisory dataset reported by the largest euro area banks. We find that while the impact of direct contagion increases gradually with the shock intensity, the effect of indirect contagion is subject to threshold effects and can increase abruptly when the threshold is exceeded. In addition, the risk posed by indirect contagion has a higher upper bound compared to direct contagion. Finally, we find that in terms of overall impact, the shocks to the value of sovereign debt and non-bank financial institutions represent the most significant risk to the functioning of the interbank market.
- JEL Code:
- G01,G21,G23,D85
- 18 December 2023
-
Working Paper Series - Issue No. 2882Details
- Abstract:
- Using confidential information on banks’ portfolios, inaccessible to market participants, we show that banks that emphasize the environment in their disclosures extend a higher volume of credit to brown borrowers, without charging higher interest rates or shortening debt maturity. These results cannot be attributed to the financing of borrowers’ transition towards greener technologies and are robust to controlling for banks’ climate risk discussions. Examining the mechanisms behind the strategic disclosure choices, we highlight that banks are hesitant to sever ties with existing brown borrowers, especially if they exhibit financial underperformance.
- JEL Code:
- G11,G15,G21
- 18 December 2023
- 18 December 2023
-
Press releaseRelated
- 18 December 2023
-
The ECB BlogDetails
- JEL Code:
- E50,E52,E58,Q50,Q54,Q51,Q58
- Subtitle:
- The ECB’s primary mandate is to maintain price stability. So why do we talk so much about climate change? In this post on The ECB Blog, we show how a hotter climate affects prices and the economy and discuss how this impacts the task of central banks.
- 18 December 2023
-
public consultation - statisticsRelated
- 18 December 2023
-
public consultation - statistics
- 18 December 2023
-
public consultation - statistics
- 18 December 2023
-
Euro area monetary and financial statistics - Quality report
- 18 December 2023
-
Survey of Monetary Analysts - Aggregate results
- 18 December 2023
-
public consultation - statisticsAnnexes
- 18 December 2023
-
public consultation - statistics
Related- 18 December 2023
-
public consultation - statistics
- 18 December 2023
-
public consultation - statistics
- 18 December 2023
-
public consultation - statisticsRelated
- 18 December 2023
-
public consultation - statistics
- 15 December 2023
- 15 December 2023
-
Governing Council decisions - Other decisions
- 14 December 2023
-
Occasional Paper Series - Issue No. 336Details
- Abstract:
- In this paper we analyse the sensitivity of the macroeconomic outcomes under the Network for Greening the Financial System’s (NGFS’s) Phase III net-zero and delayed transition scenarios to different monetary and fiscal policy settings. In doing so, we provide a rare application of the NGFS climate scenarios to economic assessment through the lens of the macroeconomic modelling frameworks underlying the scenario construction (e.g. NiGEM). Using the model to disentangle the main drivers of the scenarios, we show that gross domestic product (GDP) growth is shaped by physical and transition shocks jointly, whereas transition shocks account for most of the inflationary pressure. As regards alternative policy settings within the model, it turns out that Fiscal recycling options become more discriminant in terms of GDP impact in the medium term. Full recycling through government investment yields the strongest output multiplier, whereas recycling through household transfers or reduced income taxes yields the lowest multiplier. During the transition, euro area macroeconomic variables respond very similarly if two-pillar or price level-targeting monetary policy rules are followed. The Taylor- rule, reacting to inflation and output gap, yields higher and more persistent inflation as well as stronger short-term interest rate increases. These findings are certainly model-specific but do reflect the policy sensitivity embedded of the NGFS scenarios, within the confines of the very model used to build them up.
- JEL Code:
- Q54,E3,E6,D6
- 14 December 2023
-
Macroeconomic projections for the euro areaAnnexes
- 14 December 2023
- 28 December 2023
-
Other publication
- 14 December 2023
-
Combined monetary policy decisions and statementRelated
- 14 December 2023
-
Monetary policy statement
- 14 December 2023
-
Monetary policy decision
- 14 December 2023
-
Monetary policy statementDetails
- Subtitle:
- Christine Lagarde, President of the ECB, Luis de Guindos, Vice-President of the ECB, Frankfurt am Main, 14 December 2023
Related- 14 December 2023
-
Combined monetary policy decisions and statement
- 14 December 2023
-
Monetary policy decision
- 14 December 2023
- 14 December 2023
-
Monetary policy decisionRelated
- 14 December 2023
-
Combined monetary policy decisions and statement
- 14 December 2023
-
Monetary policy statement
- 18 January 2024
-
Monetary policy account
- 14 December 2023
-
Euro area pension fund statisticsAnnexes
- 14 December 2023
-
Euro area pension fund statistics
- 12 December 2023
- 12 December 2023
-
Weekly financial statementAnnexes
- 12 December 2023
-
Weekly financial statement - Commentary
- 12 December 2023
-
The ECB BlogDetails
- JEL Code:
- E44,G01
- Subtitle:
- Climate change can endanger financial stability. The ECB Blog looks at how a common macroprudential policy framework could complement microprudential initiatives to make the financial system more resilient.
- 12 December 2023
-
Digital Euro Preparation Phase - Scheme Rulebook Development Group documents
- 12 December 2023
-
Digital Euro Preparation Phase - Scheme Rulebook Development Group documents
- 11 December 2023
-
Press releaseRelated
- 11 December 2023
- 11 December 2023
-
Other publicationRelated
- 11 December 2023
- 7 December 2023
-
SpeechDetails
- Subtitle:
- Speech by Frank Elderson, Member of the Executive Board of the ECB and Vice-Chair of the Supervisory Board of the ECB
- 6 December 2023
-
Macroprudential Bulletin - Focus - Issue No. 23Details
- Abstract:
- This box aims at contributing to the discussion on creating more macroprudential space via a higher amount of releasable capital buffers by proposing a simple and broad quantitative indicator to measure effective macroprudential space which takes into account that releasable buffers might be constrained by overlapping parallel capital requirements. The indicator is defined as a measure of effective releasability of capital buffers, expressed as a percentage of banks’ risk weighted assets. The box further highlights both conceptual and practical implication of considering capital overlaps when assessing macroprudential space for macroprudential authorities.
- JEL Code:
- G21,G28
- 6 December 2023
-
Macroprudential Bulletin - Focus - Issue No. 23Details
- Abstract:
- This box reviews the objectives and design of the liquidity coverage ratio (LCR) in the Basel Framework. It explains why liquidity regulation was introduced and how it is calibrated to enable banks to withstand a predefined hypothetical stress scenario combining both market-wide and idiosyncratic stress elements. The box also highlights the fact that the LCR is not designed to cover all tail events involving liquidity risk. Based on data for significant euro area (EA) institutions, the box finds that around 92% of all observed net outflow rates for retail deposits were lower than the outflow rates assumed in the LCR between 2016 and 2023. It also shows that ample liquidity buffers helped significant banks in the euro area to withstand the banking stress seen in March 2023 in other jurisdictions. Nevertheless, further analysis, including on the driving factors for some of the outliers observed during stress episodes, could facilitate a better understanding of whether the LCR calibration is working as intended. To anticipate and address extreme tail events (as well as risks) not covered by the LCR, liquidity regulation needs to be complemented by frequent and granular reporting as well as rigorous supervision.
- JEL Code:
- G21,G28
- 6 December 2023
-
Macroprudential Bulletin - Focus - Issue No. 23Details
- Abstract:
- This box reviews the final 2017 Basel III reforms, explaining the main elements and their objectives. It provides updates on how the reforms will be transferred into EU legislation via amendments to the Capital Requirements Regulation and the Capital Requirements Directive (CRR3/CRD6), as well as on the state of play of the implementation of the 2017 Basel III reforms in the United States and the United Kingdom. It also serves as a reminder that the reforms will make banks more resilient and will lead to higher GDP in the long run.
- JEL Code:
- G28,K20
- 6 December 2023
-
Macroprudential Bulletin - Article - Issue No. 23Details
- Abstract:
- This article analyses the European crisis management framework for banks. It concludes that key areas for improvement are the crisis management options for small and medium-sized banks as well as preparedness for systemic crises. The European Commission’s reform proposal represents an opportunity to implement the lessons learned over the last decade.
- JEL Code:
- G01,G21,G28
- 6 December 2023
-
Macroprudential Bulletin - Article - Issue No. 23Details
- Abstract:
- This article summarises the existing evidence of window dressing and seasonality of data at year-end reporting time for global systemically important banks (G-SIBs). Window dressing and seasonality of data distort the outcome of a point-in-time reporting framework, resulting in misleading bank disclosures, mismeasurement of bank risk, inappropriate capital requirements and misallocation of capital. Reduced activity at certain points in time can also be detrimental to market functioning and has the potential to amplify shocks that coincide with period-ends. These negative consequences are amplified by the global nature of the activities and the systemic risk of the banks concerned. Possible policy options for addressing this phenomenon include different reporting requirements, such as averaging over higher frequency data, to ensure that the measurement of a bank’s contribution to systemic risk and capital allocation is commensurate with its actual risk to the financial system and the real economy throughout the year.
- JEL Code:
- G20,G21,G28
- 6 December 2023
-
The ECB BlogDetails
- JEL Code:
- G11,G15,G21
- Subtitle:
- Banks are talking more about the environment. But does such talk go hand in hand with greener lending? The ECB Blog finds a disconnect: banks talking more about their environmental policies and goals tend to lend more to brown industries.
- 5 December 2023
-
Disaggregated financial statement
- 5 December 2023
-
Weekly financial statementAnnexes
- 5 December 2023
-
Weekly financial statement - Commentary
- 5 December 2023
-
Working Paper Series - Issue No. 2881Details
- Abstract:
- We estimate spillovers from US monetary policy for different measures in the Federal Reserve’s toolkit. We make use of novel measures of exogenous variation in conventional rate policy, forward guidance and large-scale asset purchases (LSAPs) based on high-frequency asset-price surprises around Federal Open Market Committee meetings. The identification relies on relatively weak assumptions and accounts for the possible presence of residual endogenous components—such as central bank information effects—in these monetary policy surprises. We find that: (i) forward guidance and LSAPs trigger much larger spillovers than conventional rate policy; (ii) spillovers transmit predominantly through financial channels centering on global investors’ risk appetite and manifest in changes in equity prices, bond spreads, capital flows and the dollar exchange rate; (iii) LSAPs trigger immediate international portfolio re-balancing between US and advanced-economy bonds, but generally entail only rather limited term premium spillovers;(iv) both forward guidance and LSAPs entail trade-offs for emerging-market-economy central banks, either between stabilizing output and prices or between additionally ensuring financial stability in terms of capital inflows.
- JEL Code:
- F42,E52,C50
- 5 December 2023
-
Working Paper Series - Issue No. 2880Details
- Abstract:
- This paper estimates a fiscal reaction function (FRF) framework for euro area countries to test for the impact of changes in inflation on fiscal policy. We find evidence of non-linear short-term effects of HICP inflation on the primary balance after controlling for other relevant factors. Over the period 1999-2022, we unveil an inverse U-turn relationship and an inflation turning point - beyond which its short-term (contemporaneous) impact on the primary balance starts being negative - at somewhat above 4% for the sample of mature euro area economies (EA-12, first twelve EA members) and around 6% for the whole sample of euro area countries in 2022 (EA-19). Using an alternative measure of “inflation surprise” (available for the period 2003-2022) yields robust results in the larger EA-19 sample and lowers the threshold to just below 5%. In terms of channels, the non-linear effects are found to propagate through both the primary expenditure and the revenue ratio (more robustly through the former) in the EA-12 sample, while only the combined effect on the primary balance seems to prevail for EA-19. These results reflect primarily the most recent high inflation episode and indicate that in such conditions inflation can be costly for public finance flows even in the shorter run.
- JEL Code:
- H60,E62,E31,C33
- 5 December 2023
-
Press release
- 5 December 2023
-
Consumer Expectation Survey
- 5 December 2023
-
Consumer Expectation Survey
- 5 December 2023
-
Consumer Expectation Survey
- 5 December 2023
-
Consumer Expectation Survey
- 5 December 2023
-
InterviewDetails
- Subtitle:
- Interview with Isabel Schnabel, Member of the Executive Board of the ECB, conducted by Balázs Korányi on 1 December 2023
- 4 December 2023
-
SpeechDetails
- Subtitle:
- Speech by Christine Lagarde, President of the ECB, à l’Académie des sciences morales et politiques, Paris
- 4 December 2023
- 4 December 2023
-
MFI interest rate statistics
- 4 December 2023
-
The ECB BlogDetails
- JEL Code:
- E60,E61,H12,Q54
- Subtitle:
- Policy makers around the world need to move faster to reach net zero emissions by 2050. Latest scenarios are alarming as the foreseeable impact of climate change is worse than previously projected. This ECB Blog post discusses the risks of further delaying the green transition.
- 1 December 2023
-
Governing Council decisions - Other decisions
- 30 November 2023
-
Occasional Paper Series - Issue No. 335Details
- Abstract:
- Biodiversity – the variety of life on Earth – is essential for sustaining the healthy ecosystems that our economy and banks depend on. Despite the clear benefits of a healthy natural world for people and the economy, humanity is putting immense pressure on nature and biodiversity. Economic activities that rely on healthy nature are often responsible for generating environmental pressures. It is important to assess the impact that firms and financial institutions have on nature degradation, in order to reveal their exposure to transition risk and highlight the need to move towards an economic system that values nature, rather than putting it at risk. This study analyses the contribution of euro area economic activities – and the bank loans provided to enable them – to biodiversity loss by estimating biodiversity footprints. The datasets we use account for approximately €4.3 trillion in corporate loans to around 4.2 million companies located in the euro area, issued by more than 2,500 unique consolidated euro area banks. Considering two primary drivers of biodiversity loss (land-use change and climate change), the results show that the economy has had a significant impact on biodiversity, equivalent to the loss of 582 million hectares of “pristine” natural areas worldwide. Even though the impact on biodiversity is highest in Europe, the supply chains of companies are important determinants of their indirect biodiversity footprint worldwide. Asia and Africa have the largest areas impacted by activities that take place in company supply chains. Additionally, financing of economic activities with a high global impact on nature is concentrated: the ten banks with the highest financing share are responsible for financing around 40% of the total global impact of euro area firms. [...]
- JEL Code:
- C55,G21,G38,Q5
- 30 November 2023
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SpeechDetails
- Subtitle:
- Speech by Christine Lagarde, President of the ECB, at 5th ECB Forum on Banking Supervision "Europe: banking on resilience" in Frankfurt, Germany
- 30 November 2023
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Euro area insurance corporations statisticsAnnexes
- 30 November 2023
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Euro area insurance corporations statistics
- 30 November 2023
- 29 November 2023
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The ECB BlogDetails
- JEL Code:
- G32,G38,G11,Q56,Q58,Q01
- Subtitle:
- European firms need to invest in new technologies to reach carbon neutrality by 2050. This often requires them to take on debt. But what if a company is already highly leveraged? The ECB Blog looks at the relationship between firms’ indebtedness and their success in reducing emissions.
- 29 November 2023
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InterviewDetails
- Subtitle:
- Interview with Luis de Guindos, Vice-President of the ECB, conducted by Ruben Mooijman and Ariane van Caloen, on 23 November 2023
- 28 November 2023
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SpeechDetails
- Subtitle:
- Slides by Philip R. Lane, Member of the Executive Board of the ECB, at the Michael Chae Seminar on Macroeconomic Policy, Harvard University
- 28 November 2023
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Weekly financial statementAnnexes
- 28 November 2023
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Weekly financial statement - Commentary
- 28 November 2023
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Occasional Paper Series - Issue No. 334Details
- Abstract:
- We examined the net-zero commitments made by Global Systemically Important Banks (G-SIBs). In recent years, large banks have significantly increased their ambition and now disclose more details regarding their net-zero targets. There is also growing convergence, with the vast majority of G-SIBs now being part of net-zero alliances. Despite this progress, some practices should be further improved. We assessed climate-related risks disclosures publicly available for G-SIBs in 2022. The paper gives an overview about potentially problematic disclosure practices with regards to their net-zero commitments. It identifies and discusses a number of observations, such as the significant differences in sectoral targets used despite many banks sharing the same goal, the widespread use of caveats, the missing clarity regarding exposures to carbon-intensive sectors, the lack of clarity of “green financing” goals, and the reliance on carbon offsets by some institutions. The identified issues may impact banks’ reputation and litigation risk and risk management. The paper explains how the introduction of comparable international rules on climate disclosure and the introduction of transition plans, as envisaged and partly already in place in the European Union, could help mitigate these risks.
- JEL Code:
- G2,G21,G28,Q5,Q54
- 28 November 2023
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Press releaseRelated
- 28 November 2023
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Survey on the Access to Finance of Enterprises in the euro area
- 28 November 2023
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Survey on the Access to Finance of Enterprises in the euro areaAnnexes
- 28 November 2023
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SAFE questionnaire
Related- 28 November 2023
- 28 November 2023
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Monetary developments in the euro areaAnnexes
- 28 November 2023
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Monetary developments in the euro area
- 28 November 2023
-
Research Bulletin - Issue No. 113Details
- Abstract:
- Recent advances in artificial intelligence have been met with anxiety about the future of jobs. This article examines the link between AI-enabled technologies and employment shares across 16 European countries, finding that occupations potentially more exposed to AI-enabled technologies increased their employment share during the period 2010-19. This has been particularly the case for occupations with a relatively higher proportion of younger and skilled workers.
- JEL Code:
- J23,O33
- 27 November 2023
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SpeechDetails
- Subtitle:
- Speech by Christine Lagarde, President of the ECB, at the Hearing of the Committee on Economic and Monetary Affairs of the European Parliament
Annexes- 27 November 2023
- 27 November 2023
-
Speech
- 27 November 2023
-
Working Paper Series - Issue No. 2879Details
- Abstract:
- We study how monetary policy and risk shocks affect asset prices in the US, the euro area, and Japan, differentiating between “traditional” monetary policy and communication events, each decomposed into “pure” and information shocks. Communication shocks from the US spill over to risk in the euro area and vice versa, but traditional US shocks show no spillover effects to risk. Both monetary policy and communication shocks spill over to stocks, with euro area information spillovers being particularly strong. US spillovers are consistent with global CAPM intuition whereas euro area spillovers are larger. Importantly, we document a strong global component of risk shocks which is not driven by monetary policy.
- JEL Code:
- E44,E52,G12,G20,E32
- 27 November 2023
-
Survey of Monetary Analysts
- 26 November 2023
- 24 November 2023
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Working Paper Series - Issue No. 2878Details
- Abstract:
- We study the effect of changes in firms’ ESG ratings on the cost of debt of U.S. firms using a methodology change of an ESG rating provider. We find that loan spreads of downgraded ESG-rated firms in the secondary corporate loan market increase by about 10% compared to non-downgraded ESG-rated firms after the methodology change. The effect of ESG rating downgrades is not driven by the increase in the fundamental default risk of firms but rather by the premium charged by investors above the spread for default risk. The effect is stronger for firms that are more financially constrained, firms that are more exposed to ESG and, particularly, climate risk concerns as well as firms that are more held by climate-concerned lenders. We show that also loan spreads of private (unrated) firms in industries affected by ESG rating downgrades increase after the methodology change.
- JEL Code:
- E44,G20,G24
- Network:
- ECB Lamfalussy Fellowship Programme
- 24 November 2023
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The ECB BlogDetails
- Subtitle:
- Europe must push the green transition forward if it wants to remain competitive in the world. New technologies and green energy aren’t just better for the environment, they also make good economic sense. To be successful, however, the transition needs to be just and inclusive.
- 23 November 2023
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SpeechDetails
- Subtitle:
- Slides by Isabel Schnabel, Executive Board Member at the European Central Bank, for a speech at the 35th anniversary of the Porto Business School
- 23 November 2023
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Monetary policy accountRelated
- 26 October 2023
-
Monetary policy decision
- 23 November 2023
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The ECB BlogDetails
- JEL Code:
- E31,E62,H31,H53
- Subtitle:
- With rising inflation, people need more money to buy the same amount of goods. Governments can take measures to counteract this negative effect. The ECB Blog finds that recent euro area policies to support households were successful at first – but also very costly.
- 22 November 2023
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SpeechDetails
- Subtitle:
- Speech by Frank Elderson, Member of the Executive Board of the ECB and Vice-Chair of the Supervisory Board of the ECB, at the Bertelsmann Stiftung, Berlin
- 22 November 2023
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Press releaseRelated
- 22 November 2023
-
Financial Stability Review
- 22 November 2023
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Financial Stability Review - ArticleFinancial Stability Review Issue 2, 2023Details
- Abstract:
- This special feature builds on the concept of maturity gap as a metric of banks’ maturity mismatch to shed light on how banks’ engagement in maturity transformation differs across euro area countries and bank types. Banks can mitigate the interest rate risk stemming from their maturity mismatch by using derivatives for hedging purposes. Euro area banks increased their positions in interest rate derivatives over the last two years in anticipation of the start of monetary policy normalisation. Significant institutions rely more than cooperative and savings banks on interest rate derivatives and have a more diversified positioning. A box within the special feature finds that this greater reliance on derivatives was not sufficient to compensate for the material increase in interest rate risk. The extent of banks’ maturity mismatch determines the sensitivity of their net interest income to changes in interest rates and the slope of the yield curve. This special feature provides empirical evidence that the more banks engage in maturity transformation, the more their net interest margin benefits from a steepening of the yield curve, boosting bank profits. This effect might dissipate going forward, especially for banks in countries where variable-rate lending predominates.
- JEL Code:
- G21,G32
- 22 November 2023
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Financial Stability ReviewAnnexes
- 22 November 2023
-
Financial Stability Review
Related- 22 November 2023
- 21 November 2023
-
Other publication
- 21 November 2023
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SpeechDetails
- Subtitle:
- Slides by Isabel Schnabel, Member of the Executive Board of the ECB, at the International Economic Policy Lecture conference organised by the University of Würzburg in Würzburg
- 21 November 2023
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SpeechDetails
- Subtitle:
- Speech by Christine Lagarde, President of the ECB, at the high-level public discussion “Inflation kills democracy” on the occasion of the 100th anniversary of the currency reform in Germany in 1923, organised by the German Ministry of Finance in Berlin, Germany
- 21 November 2023
-
Weekly financial statementAnnexes
- 21 November 2023
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Weekly financial statement - Commentary
- 21 November 2023
-
Working Paper Series - Issue No. 2877Details
- Abstract:
- We measure the heterogeneous welfare effects of the recent inflation surge across households in the Euro Area. A simple framework illustrating the numerous channels of the transmission mechanism of surprise inflation to household welfare guides our empirical exercise. By combining micro data and aggregate time series, we conclude that: (i) country-level average welfare costs –expressed as a share of 2021–22 income– were larger than a typical recession, and heterogeneous, e.g., 3% in France and 8% in Italy; (ii) this inflation episode resembles an age-dependent tax, with the elderly losing up to 20%, and roughly half of the 25–44 year-old winning; (iii) losses were quite uniform across consumption quantiles because rigid rents served as a hedge for the poor; (iv) nominal net positions are the key driver of heterogeneity across-households; (v) the rise in energy prices generated vast variation in individual-level inflation rates, but unconventional fiscal policies were critical in shielding the most vulnerable households.
- JEL Code:
- D12,D14,D31,E21,E52,E58
- 21 November 2023
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Financial Stability Review - ArticleFinancial Stability Review Issue 2, 2023Details
- Abstract:
- Tighter financing conditions have reduced the affordability of and demand for real estate assets, putting downward pressure on prices. They have also increased the debt service costs faced by existing borrowers, with more-indebted borrowers in countries with widespread variable-rate lending being the most affected. Robust labour markets have thus far supported household balance sheets, thereby mitigating credit risk in banks’ relatively large residential real estate exposures. Commercial real estate firms, by contrast, have faced more severe challenges in a context of rising financing costs and declining profitability. While commercial real estate markets have comparatively low bank exposures, losses in this segment could act as an amplifying factor in the event of a wider shock.
- JEL Code:
- G00,G01,G21,G51,R30,R31
- 20 November 2023
-
SpeechDetails
- Subtitle:
- Slides by Philip R. Lane, Member of the Executive Board of the ECB, at the policy panel of the CEBRA ITM/IFM joint Program Meeting
- 17 November 2023
- 17 November 2023
- 17 November 2023
- 17 November 2023
- 17 November 2023
- 17 November 2023
-
SpeechDetails
- Subtitle:
- Slides by Piero Cipollone, Member of the Executive Board of the ECB, at online round table on the digital euro organised by the Greens/EFA in the European Parliament
- 17 November 2023
-
Working Paper Series - Issue No. 2876Details
- Abstract:
- The Federal Reserve’s (Fed) monetary policy announcements have created massive spillovers to global financial markets. Based on daily data for the sample from 1999 to 2019, this study finds that the Fed’s monetary policy announcements created significant international spillovers to bond yields and stock prices of European banks and non-financial corporations (NFCs), while changes in uncertainty around the expected Fed policy path and Fed information effects constituted critical additional dimensions of these spillover effects. International spillovers to bond yields of banks and NFCs were similar, while stock prices of European banks responded somewhat stronger than those of NFCs. The significant spillovers from the Fed’s forward guidance to European bond yields show that central bank communication is very relevant for international transmission. In relation to earlier studies emphasizing strong QE-related spillovers, this study suggests that Fed QE announcements created only small spillovers on bond yields and stock prices of European banks and NFCs.
- JEL Code:
- E44,E52,F42,G14,G21
- 17 November 2023
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Euro area financial vehicle corporation statisticsAnnexes
- 17 November 2023
-
Euro area financial vehicle corporation statistics
- 17 November 2023
-
Euro area investment fund statisticsAnnexes
- 17 November 2023
-
Euro area investment fund statistics
- 17 November 2023
-
Balance of payments (monthly)
- 17 November 2023
-
SpeechDetails
- Subtitle:
- Speech by Christine Lagarde, President of the ECB, at the European Banking Congress
- 16 November 2023
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SpeechDetails
- Subtitle:
- Welcome remarks by Christine Lagarde, President of the ECB and Chair of the European Systemic Risk Board, at the seventh annual conference of the ESRB
- 16 November 2023
-
Working Paper Series - Issue No. 2875Details
- Abstract:
- We propose a framework to identify a rich set of structural drivers of inflation in order to understand the role of the multiple and concomitant sources of the post-pandemic inflation surge. We specify a medium-sized structural Bayesian VAR on a comprehensive set of variables for the euro area economy. We analyse in particular various types of supply shocks, some of which were not considered relevant before the pandemic, notably global supply chain shocks and gas price shocks. The residuals of the VAR are assumed to admit a factor structure and the shocks are identified via zero and sign restrictions on factor loadings. The framework can deal with ragged-edge data and extreme observations. Shocks linked to global supply chains and to gas prices have exhibited a much larger influence than in the past. Overall, supply shocks can explain the bulk of the post-pandemic inflation surge, also for core inflation. Being able to gauge the impact of such shocks is useful for policy making. We show that a counterfactual core inflation measure net of energy and global supply chain shocks has been more stable after the pandemic.
- JEL Code:
- E31,C32,C38,Q54
- 15 November 2023
-
The ECB BlogDetails
- JEL Code:
- D83,E50,E58,E59
- Subtitle:
- When given the chance, what do media ask the ECB about? You might think journalists focus purely on core monetary policy topics, but the reality is more varied, and who is asking plays a role. Here is what we find, and why it matters for the central bank.
- 14 November 2023
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Weekly financial statementAnnexes
- 14 November 2023
-
Weekly financial statement - Commentary
- 14 November 2023
-
SpeechDetails
- Subtitle:
- Keynote speech by Frank Elderson, Member of the Executive Board of the ECB and Vice-Chair of the Supervisory Board of the ECB, at the conference on “The decade of sustainable finance: half-time evaluation”
- 14 November 2023
-
Working Paper Series - Issue No. 2874Details
- Abstract:
- Using security-by-security data on investor holdings in the euro area, we study run dynamics across different fund-shares of the same fund during the unprecedented liquidity crisis in March 2020. For an average bond or equity mutual fund-share, households, other euro area funds, and the foreign sector each represent about a quarter of the total holdings. Insurance companies hold another 14%, with all other investors combined (banks, non-financial corporations, pension funds, etc.) accounting for less than 10% of holdings. Analyzing bond funds, we show that fund-shares with higher ownership by other funds suffered substantially higher outflows (by 6 percentage points), while fund-shares with higher ownership by households had substantially lower outflows (by 5 percentage points) compared to the other fund-shares within the same fund. This gap is not driven by time-varying differences in fund performance. Results for equity funds are similar, although they faced substantially smaller outflows, coupled with much larger declines in performance, compared to bond funds. Our findings suggest that a collective “dash for cash” by consumers and firms in need of liquidity at the outset of the COVID-19 pandemic was not the source of mutual fund fragility. Instead, the most run-prone investor type turned out to be the fund sector itself.
- JEL Code:
- G01,G10,G21,G23
- 14 November 2023
-
Working Paper Series - Issue No. 2873Details
- Abstract:
- Central clearing counterparties (CCPs) were established to mitigate default losses resulting from counterparty risk in derivatives markets. In a parsimonious model, we show that clearing benefits are distributed unevenly across market participants. Loss sharing rules determine who wins or loses from clearing. Current rules disproportionately benefit market participants with flat portfolios. Instead, those with directional portfolios are relatively worse off, consistent with their reluctance to voluntarily use central clearing. Alternative loss sharing rules can address cross-sectional disparities in clearing benefits. However, we show that CCPs may favor current rules to maximize fee income, with externalities on clearing participation.
- JEL Code:
- G18,G23,G28,G12
- 14 November 2023
-
Digital Euro Preparation Phase - Scheme Rulebook Development Group documents
- 14 November 2023
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Digital Euro Preparation Phase - Scheme Rulebook Development Group documents
- 13 November 2023
-
SpeechDetails
- Subtitle:
- Speech by Luis de Guindos, Vice-President of the ECB, at the 26th Frankfurt Euro Finance Week
- 10 November 2023
-
Working Paper Series - Issue No. 2872Details
- Abstract:
- This study examines whether the level of environmental disclosure in banks’ financial reports matches less brown lending portfolios. Using granular credit register data and detailed information on firm-level greenhouse gas emission intensities, we find a negative relationship between environmental disclosure and brown lending. However, this effect is contingent on the tone of the financial report. Banks that express a negative tone, reflecting genuine concern and awareness of environmental risks, tend to lend less to more polluting firms. Conversely, banks that express a positive tone, indicating lower concern and awareness of environmental risks, tend to lend more to polluting firms. These findings highlight the importance of increasing awareness of environmental risks, so that banks perceive them as a critical and urgent pressing threat, leading to a genuine commitment to act as environmentally responsible lenders.
- JEL Code:
- G20,G21,M41,Q56
- 10 November 2023
- 9 November 2023
-
Working Paper Series - Issue No. 2871Details
- Abstract:
- In most euro area countries, the monetary/fiscal policy mix is responsible for the changing history of debt and inflation facts. Using a Dynamic Stochastic General Equilibrium model with Markov-switching policy rules, we identify three distinct monetary/fiscal regimes in France and Italy: a Passive Monetary-Active Fiscal regime (PM/AF) before the late 80s/early 90s; an Active Monetary-Passive Fiscal regime (AM/PF) with central bank independence and EMU convergence; a third regime with policy rates at the effective lower bound combined with fiscal active behavior to sustain the recovery. Our simulations reveal that the PM/AF regime in France led to price volatility and debt stabilisation, while the AM/PF regime resulted in disinflation and rising debt trajectory. Meanwhile, Italy’s procyclical fiscal policy in downturns contributed to persisting imbalances, high aggregate volatility, and low growth.
- JEL Code:
- E63,E62,E32,E52,C32
- 9 November 2023
-
Working Paper Series - Issue No. 2870Details
- Abstract:
- We empirically analyze the interaction of monetary policy with financial stability and the real economy in the euro area. For this, we apply a quantile vector autoregressive model and two alternative estimation approaches: simulation and local projections. Our specifications include monetary policy surprises, real GDP, inflation, financial vulnerabilities and systemic financial stress. We disentangle conventional and unconventional monetary policy by separating interest rate surprises into two factors that move the yield curve either at the short end or at the long end. Our results show that a build-up of financial vulnerabilities tends to be accompanied initially by subdued financial stress which resurges, however, over a medium-term horizon, harming economic growth. Tighter conventional monetary policy reduces inflationary pressures but increases the risk of financial stress. [...]
- JEL Code:
- E31,E52,G01,G10
- 9 November 2023
-
Payment instruments and systemsAnnexes
- 9 November 2023
-
Payment instruments and systems
- 9 November 2023
-
Economic Bulletin
- 9 November 2023
-
Economic Bulletin - ArticleEconomic Bulletin Issue 7, 2023Details
- Abstract:
- Since its launch in 2003, the euro area bank lending survey (BLS) has provided valuable early indications for the assessment of bank lending conditions in the euro area. This article reviews the role of the BLS at the ECB over the last 20 years. It highlights that past periods are informative for a better understanding of bank lending conditions in the current monetary policy tightening period and the changing environment in which banks operate. The article also points to the value of the BLS for analysing the impact of unconventional monetary policy measures on bank lending in the euro area, as well as the impact of other measures from supervisory and fiscal authorities. It highlights that both credit risk factors and banks’ balance sheet situation play an important role in the transmission of monetary policy to bank lending conditions, while their actual tightening contribution has varied across historical periods. The article also highlights current challenges facing euro area banks and the need to monitor possible vulnerabilities which may affect the transmission of monetary policy via banks.
- JEL Code:
- E4,E44,E5,E52,G21
- 9 November 2023
-
Economic Bulletin - BoxEconomic Bulletin Issue 7, 2023Details
- Abstract:
- This box first analyses a bottom-up composite index of business activity expectations across sectors derived from the European Commission’s business survey. It then assesses the role of demand-side and supply-side drivers of the index, using disaggregated data on expectations and limits to production from the same survey. The bottom-up composite index of business activity expectations appears to be a good leading indicator of real GDP. According to the index, business activity expectations have deteriorated since mid-2022, with the decline occurring earlier than the weakening of economic growth in the euro area. An empirical model is then used to assess the impact of drivers on business activity expectations. The model captures historical business cycle patterns. It shows that recent trends in business activity expectations were driven by deteriorating demand, partly offset by improved supply. A granular model-based decomposition suggests that tightening financial conditions and flagging product demand were the main drag on business activity expectations across sectors in the third quarter of 2023.
- JEL Code:
- C11,E10,E60
- 9 November 2023
-
Economic Bulletin - BoxEconomic Bulletin Issue 7, 2023Details
- Abstract:
- The decrease in euro area import prices since March 2023 has been associated with the normalisation of global supply chains amid the re-opening of the Chinese economy. Meanwhile, Chinese producer price inflation has been negative for some time, mainly driven by declining Chinese commodity prices and other China-specific factors. Lower producer prices have put downward pressure on China’s export prices and, in turn, on euro area import prices. Economic developments in China also affect euro area import prices indirectly, given China’s important role in the global demand for commodities and as a supplier of intermediate and capital goods to the rest of the world. Empirical evidence from a structural VAR analysis points to tangible spillovers to euro area import prices from Chinese demand and supply shocks, both during the surge in import prices in 2021-22 and in the subsequent plunge in 2023. The magnitude of the estimated disinflationary impact of falling Chinese producer/export prices on euro area HICP inflation is more limited, as euro area consumer price developments also depend on many other factors.
- JEL Code:
- E31,F41
- 9 November 2023
-
SpeechDetails
- Subtitle:
- Welcome address by Philip R. Lane, Member of the Executive Board of the ECB, at the ECB Conference on Money Markets
- 9 November 2023
-
InterviewDetails
- Subtitle:
- Interview with Luis de Guindos, Vice-President of the ECB, conducted by Albina Kenda
- 8 November 2023
-
Working Paper Series - Issue No. 2869Details
- Abstract:
- The feedback loop between sovereign and financial sector insolvency has been identified as a key driver of the European debt crisis and has motivated an array of policy proposals. We revisit this “doom loop” focusing on governments’ incentives to default. To this end, we present a simple 3-period model with strategic sovereign default, where debt is held by domestic banks and foreign investors. The government maximizes domestic welfare, and thus the temptation to default increases with externally-held debt. Importantly, the costs of default arise endogenously from the damage that default causes to domestic banks’ balance sheets. Domestically-held debt thus serves as a commitment device for the government. We show that two prominent policy prescriptions – lower exposure of banks to domestic sovereign debt or a commitment not to bailout banks – can backfire, since default incentives depend not only on the quantity of debt, but also on who holds it. Conversely, allowing banks to buy additional sovereign debt in times of sovereign distress can avert the doom loop. In an extension we show that in the context of a monetary union (such as the euro area) similar unintended negative consequences may arise from the pooling of debt (such as European safe bond aka. ESBies). A backstop by the central bank (such as the ECB’s Transmission Protection Instrument) can successfully disable the loop if precisely calibrated.
- JEL Code:
- E44,E6,F34
- 8 November 2023
-
Working Paper Series - Issue No. 2868Details
- Abstract:
- We analyse the drivers of Bitcoin transactions against 44 fiat currencies in the largest peer-to-peer crypto exchanges. Momentum and volatility in the cryptoasset market, as well as volatility and liquidity in global financial markets do matter for Bitcoin trading. There is suggestive evidence of a global crypto cycle driven by speculative motives. However, in emerging and developing economies (EMDEs), Bitcoin seems to offer also transactional benefits, since trading increases when the value of the domestic currency is unstable. Proxies of banking depth and digitalisation are negatively correlated with the currency loadings on the global factor, indicating that crypto-assets may offer a speculative alternative to traditional finance when this is not available, especially in EMDEs where the share of younger risk-prone population is higher. Our results clearly point to potential financial stability risks from cryptoisation in EMDEs with low levels of financial development and unstable fiat currencies.
- JEL Code:
- E42,F21,F24,F32,F38,G15,O33
- 8 November 2023
-
The ECB BlogDetails
- JEL Code:
- E24,J21,J24,J64,J11
- Subtitle:
- More people than ever are in a job or are looking for one – labour force participation in the euro area is at an all-time high. This week, The ECB Blog looks at who the new workers are and discusses changes in labour force demographics over the last two decades.
- 8 November 2023
- 8 November 2023
-
Consumer Expectation Survey
- 8 November 2023
-
Consumer Expectation Survey
- 8 November 2023
-
Consumer Expectation Survey
- 8 November 2023
-
Consumer Expectation Survey
- 8 November 2023
-
Economic Bulletin - BoxEconomic Bulletin Issue 7, 2023Details
- Abstract:
- This box describes recent developments in housing rents in the euro area, also comparing them with developments in the United States. In the post-COVID period, increases in euro area rents have been moderate, despite a notable pick-up since mid-2022. This stands in contrast to the United States, where rent inflation has been a key driver of the post-pandemic inflation surge. Such differences are linked not only to measurement issues, but also to structural features of the housing market and regulatory specificities. Rent regulation is more prevalent in the euro area, where such institutional features have so far acted as a brake on rent rises.
- JEL Code:
- E31,R21,R31
- 8 November 2023
-
Economic Bulletin - BoxEconomic Bulletin Issue 7, 2023Details
- Abstract:
- This box studies how the transmission of monetary policy is affected by the growing service intensity of the euro area economy. The results show that higher service intensity dampens the impact of monetary policy on economic activity. At the same time, this dampening effect is moderate: we estimate that the increase in the service intensity observed since the introduction of the euro has reduced the real impact of monetary policy by less than 10%.
- JEL Code:
- C32,E32,E52
- 8 November 2023
-
SpeechDetails
- Subtitle:
- Slides by Philip R. Lane, Member of the Executive Board of the ECB, at Latvijas Banka Economic Conference 2023
- 7 November 2023
-
Occasional Paper Series - Issue No. 333Living in a world of disappearing nature: physical risk and the implications for financial stabilityDetails
- Abstract:
- The loss of biodiversity and the degradation of natural ecosystems pose a significant threat to the broader economy and financial stability that central banks and financial supervisors cannot ignore. To gain further insights into the implications of nature and ecosystem service degradation for financial stability, this study assesses the dependencies of euro area non-financial corporations and banks on different ecosystem services. The study then develops a method to capture banks’ credit portfolio sensitivity to possible future changes in the provision of ecosystem services. Our results show that 75% of all corporate loan exposures in the euro area have a strong dependency on at least one ecosystem service. We also find that loan portfolios may be significantly affected if nature degradation continues its current trend, with greater vulnerabilities concentrated in certain regions and economic sectors.
- JEL Code:
- C55,G21,G38,Q5
- 7 November 2023
-
Disaggregated financial statement
- 7 November 2023
-
Weekly financial statementAnnexes
- 7 November 2023
-
Weekly financial statement - Commentary
- 7 November 2023
-
Digital Euro Preparation Phase document
- 7 November 2023
-
Working Paper Series - Issue No. 2867Details
- Abstract:
- We compare networks constructed using five commonly used methods and publicly available daily market data to networks based on reported exposures along several dimensions of the balance sheet, i.e., loans, bonds, equity. Our findings suggest that while the global network structure remains stable, individual exposures are more dynamic. The main message from the regression analysis is that the market-based networks do their job relatively well, however, various market-based networks capture different types of exposures. All the measures reflect common portfolios of bonds and loans. Equity-based measures match better direct and indirect equity, while credit-risk measures capture direct bonds. None of the measures robustly identify direct interbank lending.
- JEL Code:
- G20,L14,D85,C63
- 7 November 2023
-
Working Paper Series - Issue No. 2866Details
- Abstract:
- Using detailed micro-data, this paper documents that households with lower income risk (and higher income levels) exhibit a higher Marginal Propensity to Consume (MPC) in response to transitory income shocks, all else being equal. This finding is particularly significant among unconstrained households and supported by models with precautionary saving only if designed to account for the empirically observed negative correlation between income levels and income risk. This interaction generates saving dynamics such that the stationary distribution of wealth among households facing different risk levels is not polarized.Therefore, it is possible to compare their respective MPCs within wealth and identify the reduction in MPC due to labor income risk. Otherwise, the effects of income risk are masked by wealth effects. In neither case, the MPC depends on (permanent, persistent, or current) income levels, whose direct effect on the MPC is always ambiguous. Finally, simulations of targeted fiscal rebates for specific labor categories reveal that governments cannot simultaneously stimulate aggregate demand and mitigate income risk.
- JEL Code:
- D12,D52,D81,E21,J31
- 7 November 2023
-
Economic Bulletin - BoxEconomic Bulletin Issue 7, 2023Details
- Abstract:
- This box highlights the recent inversion of the euro area and US yield curves and considers its information content for the future state of these economies. The slope of the yield curve is currently negative and the most steeply inverted it has been in decades for both the euro area and the United States. Among other factors, a negative slope may reflect investors’ expectations that the macroeconomic outlook will worsen, inflation will decline and longer-term yields will be lower as growth slows. In the past, the slope has typically had statistical predictive power for economic downturns. Recent estimates based on this indicator point to a high probability of a recession in the next 12 months in both jurisdictions. However, estimated recession probabilities are considerably lower when the models include information from additional financial indicators and oil prices, and when they account for the yield impact of the balance sheet policies of central banks. The analysis therefore highlights that a simple translation of the current historically negative yield curve slopes into a high recession probability would be an incomplete assessment.
- JEL Code:
- G1,E4,C5
- 6 November 2023
-
Economic Bulletin - BoxEconomic Bulletin Issue 7, 2023Details
- Abstract:
- This box summarises the findings of an ad hoc survey of leading firms operating in the euro area, looking at current trends in global production location and input sourcing, and their impact on activity and prices. The responses indicate that firms increasingly expect to respond to heightened geopolitical risk. In the next five years, more so than in the last five years, firms expect to diversify the location of their operations and their sources of inputs, and to move operations and supply chains to countries that are geographically and geopolitically closer to the final points of sale. Many firms that source critical inputs from China are reducing this exposure. Geopolitical risk is now the most important factor behind decisions to relocate operations into the EU, while demand and cost factors still drive relocations out of the EU. Overall, the aggregate impact which relocation decisions will have on the share of value added generated by firms in the EU is unclear, but such decisions have already pushed up prices and will continue to do so – albeit to a lesser extent – in the next few years.
- JEL Code:
- C83,F13,F51,L23
- 6 November 2023
-
Working Paper Series - Issue No. 2865Details
- Abstract:
- The Household Finance and Consumption Survey (HFCS) provides valuable information for the monetary policy and financial stability purposes. The dataset shows, however, inconsistencies with National Account (NtlA) statistics, as the aggregated HFCS micro data do usually not match the corresponding NtlA macro data. Therefore, we suggest a solution to close the gap via an optimization problem that aims at preserving for each wealth instrument the level of inequality measured by the Gini coefficient. In addition, a lower and an upper bound of inequality are derived, that can be reached by extreme allocations of the wealth discrepancies across the households. Finally, based on the German HFCS, we compare the findings with another approach suggested in the literature that uses a “multivariate calibration”. The comparison indicates that the multivariate calibration may reallocate households’ wealth beyond the observed discrepancies, thereby leading to Gini coefficients that exceed the analytically derived upper bound of inequality.
- JEL Code:
- C46,C61,D31,G51,N34
- Network:
- Household Finance and Consumption Network (HFCN)
- 6 November 2023
-
Working Paper Series - Issue No. 2864Details
- Abstract:
- This paper investigates the contribution of capital markets to international risk sharing in the euro area over the 2000Q1-2021Q1 period. It provides three main contributions: First, the estimation of country-specific vector autoregressions (VAR) shows that shock absorption through capital markets remains modest, particularly in the southern euro area. Second, we analyse the geographical patterns of the capital channel. While risk sharing between southern and northern euro area countries led the improvements in income smoothing at the beginning of the 2000s, intra-regional capital flows supported income smoothing in the recent past. Third, based on a panel threshold VAR, we analyse how the composition of external capital positions impacts the capital channel. Long-term portfolio debt assets and liabilities as well as equity liabilities significantly improved income smoothing. The effect is more pronounced for northern countries, in line with their larger cross-border portfolios, when compared to the southern countries. Regarding foreign direct investment, only northern countries benefited from inward positions.
- JEL Code:
- C23,E62,G11,G15
- 4 November 2023
-
InterviewDetails
- Subtitle:
- Interview with Christine Lagarde, President of the ECB, conducted by Alexis Papahelas on 30 October
- 3 November 2023
-
Working Paper Series - Issue No. 2863Details
- Abstract:
- Labour shortages have become prevalent across advanced economies. Yet, little is known about which firms are more likely to face them and the impact they have on the labour market. We create a firm-level data set spanning 28 EU countries, 283 regions and 18 sectors, contributing to close this gap. We find that structural factors play the dominant role. Firms in regions with limited labour supply as well as innovative and fast-growing firms are particularly prone to face labour shortages. Moreover, shortages tend to aggravate at business cycle peaks. In a second stage, we empirically determine the impact of labour shortages on wages and hiring. Firms with higher shortages pay a wage growth premium to keep and attract workers, increasingly so if they face excess demand. At the same time, those are the firms that hire less than the average.
- JEL Code:
- C36,E24,J20,J23,J30
- 3 November 2023
-
Working Paper Series - Issue No. 2862Details
- Abstract:
- This paper studies the impact of national carbon taxes on CO2 emissions. To do so, we run local projections on a cross-country panel dataset, matching measures of emissions of carbon dioxide with information on the introduction of carbon taxes and their implied price. Importantly, we consider both measures of territorial emissions — emissions emitted within a country’s borders — and consumption emissions — emissions emitted anywhere in the world to satisfy domestic demand. We find that carbon taxes reduce territorial emissions over time, but have no significant effect on consumption emissions. Our estimates are robust to propensity-score weighting adjustments and are driven by countries which are more open to trade. Carbon taxes also lead to a modest increase in imports, suggesting that international trade may imply a negative carbon externality. Together, our findings highlight the limitations of national carbon taxes in isolation and the importance of international cooperation in reducing global emissions.
- JEL Code:
- F18,F64,H23,Q58
- 2 November 2023
-
SpeechDetails
- Subtitle:
- Keynote speech by Isabel Schnabel, Member of the Executive Board of the ECB, at the annual Homer Jones Memorial Lecture
Annexes- 2 November 2023
-
Speech
- 2 November 2023
- 2 November 2023
-
SpeechDetails
- Subtitle:
- Slides by Philip R. Lane, Member of the Executive Board of the ECB, at the University of Limerick, Ireland
- 2 November 2023
-
Working Paper Series - Issue No. 2861Details
- Abstract:
- Using daily data since 2017, we disentangle China-specific structural shocks driving Chinese financial markets and examine spillovers across global markets. The novelty of this paper consists of simultaneously identifying China shocks with shocksemanating from the United States and shocks to global risk sentiment – two major forces driving global financial markets – to ensure that China spillover estimates do not reflect common factors. Our results show that shocks originating in China havematerial impacts on global equity markets, although spillovers are much smaller than those following shocks in the United States, or those triggered by shifts in global risk sentiment. By contrast, shocks from China account for a significant proportion of variation in global commodity prices, more on a par with those of the United States. Nevertheless, spillovers from China can be significantly amplified in an environment of heightened global volatility, or when the shocks are large.
- JEL Code:
- E44,E52,G15
- 2 November 2023
-
Working Paper Series - Issue No. 2860Financial shock transmission to heterogeneous firms: the earnings-based borrowing constraint channelDetails
- Abstract:
- We study the heterogeneous impact of jointly identified monetary policy and global riskshocks on corporate funding costs. We disentangle these two shocks in a structural BayesianVector Autoregression framework and investigate their respective effects on funding costsof heterogeneous firms using micro-data for the US. We tease out mechanisms underlyingthe effects by contrasting financial frictions arising from traditional asset-based collateralconstraints with the recent earnings-based borrowing constraint hypothesis, differentiatingfirms across leverage and earnings. Our empirical evidence strongly supports the earnings-basedborrowing constraint hypothesis. We find that global risk shocks have stronger andmore heterogeneous effects on corporate funding costs which depend on firms’ positionwithin the earnings distribution.
- JEL Code:
- G12,E43,E52
- 2 November 2023
-
The ECB BlogDetails
- JEL Code:
- D14,E21,D12,D31,H31
- Subtitle:
- During the pandemic many people put more money aside than usual. So what is happening with these additional funds? The ECB Blog looks at which households built up excess savings and how they are using the money.
- 2 November 2023
-
MFI interest rate statistics
- 2 November 2023
-
€STR Transparency on errors
- 31 October 2023
-
Press release
- 31 October 2023
-
Weekly financial statementAnnexes
- 31 October 2023
-
Weekly financial statement - Commentary
- 31 October 2023
-
Working Paper Series - Issue No. 2859Details
- Abstract:
- Using administrative data on mortgages issued in Italy between 2018 and 2019,this paper estimates loan demand elasticities to maturity and interest rate. We findthat households are responsive to both contract terms: a 1% decrease in interestrate increases the average loan size by 0.22% whereas a commensurable increasein maturity increases loan demand by 0.30%. This evidence suggests that creditconstraints are relevant in this market. Things change substantially when movingalong the distribution of contract maturities: short term borrowers are unresponsive to their contract lengthwhile maturity elasticities are higher for long term borrowers.
- JEL Code:
- D12,D14,D15,G11,G51
- 31 October 2023
-
The ECB BlogDetails
- JEL Code:
- E42,O19,F36
- Subtitle:
- Making cross-border payments cheaper, faster, and easily accessible would bring huge benefits to businesses and households alike, especially in emerging markets and developing economies.
- 30 October 2023
-
SpeechDetails
- Subtitle:
- Remarks by Luis de Guindos, Vice-President of the ECB at the Business Leadership Forum organised by IE University, Madrid, 30 October 2023
- 30 October 2023
-
Working Paper Series - Issue No. 2858Details
- Abstract:
- This paper studies the effect of monetary policy on inflation along the income distributionin several euro area countries. It shows that monetary policy has differential effects and identifies twochannels which point in opposite directions. On the one hand, different consumption shares imply thatthe inflation experienced by high-income households responds less to monetary policy. On the otherhand, the paper provides novel evidence that there are substantial differences in shopping behaviourand its reaction to monetary policy, which imply that the inflation experienced by high-income householdsresponds more to monetary policy.
- JEL Code:
- E31,E52,D30
- Network:
- Price-setting Microdata Analysis Network (PRISMA)
- 30 October 2023
-
Working Paper Series - Issue No. 2857Details
- Abstract:
- Official estimates of economic growth are regularly revised and therefore forecasts for GDP growth are done on the basis of ever-changing data. The economic literature has intensively studied the properties of those revisions and their implications for forecasting models. However, it is much less known about the reasons for Statistical Agencies (SAs) to revise their estimates. In order to be timely and reliable, SAs have an explicit interest in not revising their initial GDP estimates too much, while they are much more open to revise GDP components over time. More than a curiosity, we exploit this resulting cross-correlation of GDP components revisions to build a model to better forecast GDP.
- JEL Code:
- C01,C82,E01
- 30 October 2023
-
Survey of Monetary Analysts - Aggregate results
- 30 October 2023
- 27 October 2023
-
Governing Council decisions - Other decisions
- 27 October 2023
-
Euro area economic and financial developments by institutional sector (full)
- 27 October 2023
-
Press releaseRelated
- 27 October 2023
-
Survey of Professional Forecasters
- 27 October 2023
-
Survey of Professional ForecastersAnnexes
- 27 October 2023
Related- 27 October 2023
- 27 October 2023
-
Economic Bulletin - BoxEconomic Bulletin Issue 7, 2023Details
- Abstract:
- This box summarises the findings of recent contacts between ECB staff and representatives of 56 leading non-financial companies operating in the euro area. According to these exchanges, which took place between 25 September and 5 October, aggregate activity appeared to have contracted in the third quarter of 2023 and was expected to contract further in the fourth quarter. While there were still notable differences across sectors, tailwinds supporting activity in some sectors were reportedly fading and headwinds in other sectors continued to hold activity back. The growth rate of selling prices continued to slow in the third quarter of 2023 and further moderation was anticipated for the fourth quarter. This reflected a recovery of supply alongside moderating demand in some sectors, as well as relatively stable non-labour input costs. Wage growth remained strong but was expected to moderate slightly in 2024. The effect of tightening financing conditions over the past 12 months was notably greater in the industrial sector than in the services sector and was expected, on balance, to intensify in the next 12 months.
- JEL Code:
- E2,E3,L2
- 26 October 2023
-
PodcastRelated
- 26 October 2023
-
Monetary policy statement
- 26 October 2023
-
Combined monetary policy decisions and statementRelated
- 26 October 2023
-
Monetary policy statement
- 26 October 2023
-
Monetary policy statementDetails
- Subtitle:
- Christine Lagarde, President of the ECB, Luis de Guindos, Vice-President of the ECB, Athens, 26 October 2023
Related- 26 October 2023
-
Combined monetary policy decisions and statement
- 26 October 2023
-
Monetary policy decision
- 26 October 2023
- 26 October 2023
-
Monetary policy decisionRelated
- 26 October 2023
-
Monetary policy statement
- 23 November 2023
-
Monetary policy account
- 25 October 2023
-
SpeechDetails
- Subtitle:
- Speech by Christine Lagarde, President of the ECB, at the official dinner of the Bank of Greece in Athens, Greece
- 25 October 2023
-
Monetary developments in the euro areaAnnexes
- 25 October 2023
-
Monetary developments in the euro area
- 24 October 2023
-
Weekly financial statementAnnexes
- 24 October 2023
-
Weekly financial statement - Commentary
- 24 October 2023
-
Press releaseRelated
- 24 October 2023
-
Euro area bank lending survey
- 24 October 2023
-
Euro area bank lending surveyAnnexes
- 24 October 2023
-
Euro area bank lending survey - Annex
Related- 24 October 2023
-
Press release
- 23 October 2023
-
Occasional Paper Series - Issue No. 332Details
- Abstract:
- The recent spike in inflation, unprecedented in the history of the Economic and Monetary Union (EMU), has had major consequences for all areas of the economy, including public finances. This paper aims to provide a detailed assessment of the effects of high inflation on fiscal accounts in the euro area. Relying on the wealth of expertise in the Eurosystem – within the Working Group on Public Finance – it documents spending indexation arrangements in all euro area countries. Thanks to this knowledge, the ECB’s fiscal projection platform, which is the primary evaluation tool for this study, establishes a realistic link between prices and fiscal variables. The results of this paper bring into question the conventional wisdom on the overall positive effects of inflation on fiscal accounts. Indeed, the simulations point to adverse effects from the recent inflation surge, mainly triggered by an external supply shock, on budget balances during 2022-24. This is even without taking into account the negative impact of inflation on the real economy, mainly through monetary policy tightening. The analysis also points to the important role of the denominator effect for debt-to-GDP ratios, which may fall even in the absence of benefits for the budget balance. Finally, the analysis reveals a high degree of heterogeneity across countries.
- JEL Code:
- C3,E3,E6
- 19 October 2023
-
Balance of payments (monthly)
- 18 October 2023
- 18 October 2023
- 18 October 2023
-
Digital Euro Investigation Phase - Progress Report
- 18 October 2023
-
Digital Euro Investigation Phase document
- 17 October 2023
-
SpeechDetails
- Subtitle:
- Dinner speech by Luis de Guindos, Vice-President of the ECB, at the 5th ECB macroprudential policy and research conference jointly organised with the International Monetary Fund
- 17 October 2023
-
Weekly financial statementAnnexes
- 17 October 2023
-
Weekly financial statement - Commentary
- 17 October 2023
-
Research Bulletin - Issue No. 112Details
- Abstract:
- Inflation forecasts and their risks are key for monetary policy decisions. The strategy review concluded in 2021 highlighted how most Eurosystem models used to forecast inflation are linear. Linear models assume that changes in, for example, wages, always have the same fixed, proportional effect on inflation. A new machine learning model, recently developed at the ECB, captures very general forms of non-linearity, such as a changing sensitivity of inflation dynamics to prevailing economic circumstances. Forecasts from this machine learning model closely track Eurosystem staff inflation projections, suggesting that these projections capture mild non-linearity in inflation dynamics – likely owing to expert judgement – and are in line with state-of-the-art econometric methodologies.
- JEL Code:
- C52,C53,E31,E37
- 16 October 2023
-
Occasional Paper Series - Issue No. 331Details
- Abstract:
- Despite the crypto-market crash in the spring of 2022 and the collapse of FTX in November 2022, decentralised finance (DeFi) proponents are still predicting that DeFi may soon go mainstream. As well as the increasing involvement of regulated financial institutions in the DeFi area, the incipient presence of regulatory, supervisory and oversight frameworks may lead to more mainstream acceptance of DeFi. Many DeFi projects are structured in the form of a decentralised autonomous organisation (DAO), a virtual organisation built and run on code and blockchain technology. As this new DAO corporate structure has benefits appropriate for the era of digitalisation and decentralisation, the number of DAOs is growing. However, most countries around the globe do not yet have in place a specific legal regime for DAOs. Until now, DAOs have been operating outside of regulatory financial frameworks, even though they may perform functions that are similar to regulated financial institutions or market infrastructures. The legal characterisation of DAOs depends on national laws that may or may not apply, depending on how the DAO itself is actually set up and on court judgements. This paper introduces the DAO structure and how it relates to other methods of organisation in finance. The paper lists use cases and describes the benefits and drawbacks of the DAO structure, taking a closer look at (inter)national regulatory frameworks, guidelines and recommendations in order to discuss whether, how and to what extent DAOs might comply. A policy position on the desirability and conditions under which DAOs could bring efficient, safe and stable innovations to the financial sector depends on the specificities of the individual DAOs, the potential applicable regulatory frameworks and the continuously evolving technical developments, as well as (inter)national guidelines and recommendations. This paper proposes that the establishment of regulatory frameworks on crypto-assets and crypto-asset s
- JEL Code:
- F38,F39,G23,G32,K22,L22,L31
- 16 October 2023
-
InterviewDetails
- Subtitle:
- Interview with Philip R. Lane, member of the Executive Board of the ECB, conducted by Marcel de Boer, Marijn Jongsma and Joost van Kuppeveld on 11 October 2023
- 16 October 2023
- 15 October 2023
-
Occasional Paper Series - Issue No. 330Details
- Abstract:
- This paper analyses the distributional impact of high consumer inflation in the euro area and government measures to compensate households in 2022. The study uses the tax-benefit microsimulation model for the European Union (EUROMOD) with microdata as the input – EU statistics on income and living conditions (EU-SILC) and household budget surveys (HBS) – to quantify the distributional impact of inflation, income support measures and measures aimed at containing prices. The analysis confirms that purchasing power and welfare were more severely affected by the 2022 inflation surge in lower-income households than in higher-income households. Fiscal measures compensated households for about a third of their welfare loss, though with significant differences between countries. At the same time, fiscal measures closed around 60% of the inequality gap between lower and higher-income households. Most fiscal measures were not particularly well targeted at low-income households, resulting in a higher than necessary fiscal burden to cushion the distributional impact of the inflationary shock.
- JEL Code:
- D12,D31,D60,E31,H20,I30
- 14 October 2023
-
SpeechDetails
- Subtitle:
- Statement by Christine Lagarde, President of the ECB, at the forty-eight meeting of the International Monetary and Financial Committee
- 12 October 2023
-
Monetary policy accountRelated
- 14 September 2023
-
Monetary policy decision
- 11 October 2023
-
Working Paper Series - Issue No. 2856Details
- Abstract:
- The systemic risk measure (SRISK) by V-Lab provides a market view of the vulnerability of financial institutions to a sudden downturn in the economy. To overcome the shortcoming that it cannot be applied to non-listed banks, SRISK characteristics of listed banks are mapped on balance sheet information. Systemic risk tends to be higher for banks that are larger, less profitable and have lower equity funding. Balance sheet information provides a surprisingly good approximation of SRISK for non-listed banks, when compared with banks’ capital depletion from the EU-wide stress testing exercises in 2018 and 2021. The proposed methodology can usefully complement the more thorough overview provided by traditional stress tests, providing supervisors the option to evaluate the systemic risks of the banking system at a higher frequency and at a fraction of the costs.
- JEL Code:
- G21,G28,G1
- 11 October 2023
-
Working Paper Series - Issue No. 2855Details
- Abstract:
- The Banking Euro Area Stress Test (BEAST) is a large-scale semi-structural model developed to analyse the euro area banking system from a macroprudential perspective. The model combines the dynamics of approximately 90 of the largest euro area banks with those of individual euro area economies. It reflects the heterogeneity of banks by replicat-ing the structure of their balance sheets and profit and loss accounts. Additionally, it allows banks to adjust their assets, funding mix, pricing decisions, management buffers, and profit distribution along with individual bank conditions, including their capital and liquidity re-quirements, and other supervisory limits. The responses of banks impact credit supply con-ditions and have feedback effects on the macroeconomic environment. Stochastic solutions of the model provide a solid foundation for investigating multiple scenarios, deriving at-risk measures, and estimating model uncertainty. The model is regularly utilised to assess the resilience of the euro area banking sector, including in the biennial ECB macroprudential stress tests, as well as to analyse the effects of regulatory, macroprudential, and monetary policy changes.
- JEL Code:
- E37,E58,G21,G28
- 11 October 2023
-
Press release
- 11 October 2023
-
Consumer Expectation Survey
- 11 October 2023
-
Consumer Expectation Survey
- 11 October 2023
-
Consumer Expectation Survey
- 11 October 2023
-
Consumer Expectation Survey
- 11 October 2023
-
The ECB BlogDetails
- JEL Code:
- H10,H21,E62,H11,H26,H30,A50
- Subtitle:
- The euro area economy has recovered swiftly from the pandemic, supply bottlenecks and the energy price shock. But there is no room for complacency. Structural weaknesses are still a brake on income and productivity growth. Governments need to implement reforms to make European economies stronger and promote social fairness.
- 10 October 2023
-
Weekly financial statementAnnexes
- 10 October 2023
-
Weekly financial statement - Commentary
- 10 October 2023
-
Research Bulletin - Issue No. 111Details
- Abstract:
- Climate change has implications for price stability and the work of central banks. It may increase the volatility and heterogeneity of inflation, and hotter summers may lead to more frequent and persistent upward pressures on food and services inflation. Our empirical study provides evidence for the four largest euro area economies and outlines the relationship between temperature and inflation.
- JEL Code:
- Q54,E31,C32
- 10 October 2023
-
Digital Euro Investigation Phase - Scheme Rulebook Development Group documents
- 10 October 2023
-
Digital Euro Investigation Phase - Scheme Rulebook Development Group documents
- 9 October 2023
-
Working Paper Series - Issue No. 2854Details
- Abstract:
- This paper empirically examines the extent to which prudential policies can help to reduce the macro-financial spillover effects of foreign monetary policy for all 28 EU countries. Using local projection methods, I show that EU countries with tighter prudential policies face significantly smaller, and less negative spillovers to bank credit and house prices from US, UK and EA monetary policy tightening shocks. Measures of a macroprudential policy nature such as capital buffers, lending standards restrictions and limits to credit growth appear to be particularly effective at mitigating the spillover effects of US monetary policy, while measures of a microprudential nature as minimum capital requirements, risk weights and limits on large exposures prove effective in mitigating spillovers effects of UK monetary policy. Results indicate that domestic prudential policies can dampen EU countries’ exposure to foreign monetary policy and may be a useful tool in the face of spillovers coming from centre countries and within the EU.
- JEL Code:
- E52,E58,E61,F42,F45
- 9 October 2023
-
Working Paper Series - Issue No. 2853Details
- Abstract:
- We compare supermarket price setting in the US and the euro area and assess its impact on food inflation. We introduce a novel scanner dataset of Germany, the Netherlands, France, and Italy (EA4) and contrast it with an equivalent dataset from the US. We find that both higher frequency and stronger state dependence of price changes contribute to higher flexibility of supermarket inflation in the US relative to the euro area. We argue that the driving force behind both factors is higher cross-sectional volatility in the US. Larger product-level fluctuations both force retailers to adjust prices more frequently and increase price misalignments, which increase the selection of large price changes. [...]
- JEL Code:
- E31,E32,E52,F44
- 9 October 2023
-
Survey of Monetary Analysts
- 8 October 2023
-
InterviewDetails
- Subtitle:
- Interview with Christine Lagarde, President of the ECB, conducted by Marie-Pierre Gröndahl on 2 October 2023
- 6 October 2023
-
InterviewDetails
- Subtitle:
- Interview with Isabel Schnabel, Member of the Executive Board of the ECB, conducted by Marina Klepo on 29 September 2023
- 6 October 2023
-
Press releaseRelated
- 6 October 2023
- 6 October 2023
-
Survey on credit terms and conditions in euro-denominated securities financing and OTC derivatives marketsAnnexes
- 6 October 2023
-
Other publication
- 5 October 2023
-
Working Paper Series - Issue No. 2852Details
- Abstract:
- News media play a fundamental role in the communication between central banks and the public. Besides stimulating institutional transparency, the reporting of the news media on a central bank’s activities is also the main source of information about the institution for most citizens. To better understand how this intermediation process works, this paper explores the Q&A session of the European Central Bank (ECB)’s press conferences, where journalists have an opportunity to set the discussion and inquire into the central bank’s thinking. Using a structural topic model on a novel dataset consisting of all questions asked at ECB press conferences since May 2012, we conduct a systematic examination of the topics the ECB is questioned about and uncover differences in the focus of outlets from different geographical areas and with different types of audiences. We find that international outlets devote more attention to technical topics, relevant for market participants, while domestic media in the European Union (EU) dedicate greater focus to national affairs and the more political dimensions of the ECB’s activities.
- JEL Code:
- E52,E58,E59
- 5 October 2023
-
Working Paper Series - Issue No. 2851Details
- Abstract:
- We propose a novel identification design to estimate the causal effects of systematic monetary policy on the propagation of macroeconomic shocks. The design combines (i) a time-varying measure of systematic monetary policy based on the historical composition of hawks and doves in the Federal Open Market Committee (FOMC) with (ii) an instrument that leverages the mechanical FOMC rotation of voting rights. We apply our design to study the effects of government spending shocks. We find fiscal multipliers between two and three when the FOMC is dovish and below zero when it is hawkish. Narrative evidence from historical FOMC records corroborates our findings.
- JEL Code:
- E32,E52,E62,E63,H56
- 5 October 2023
-
Euro area economic and financial developments by institutional sector (early)
- 5 October 2023
-
Balance of payments (quarterly)
- 4 October 2023
- 4 October 2023
-
Disaggregated financial statement
- 4 October 2023
-
Weekly financial statementAnnexes
- 4 October 2023
-
Weekly financial statement - Commentary
- 4 October 2023
-
SpeechDetails
- Subtitle:
- Keynote speech by Luis de Guindos, Vice-President of the ECB, at the First Annual Conference organised by the Central Bank of Cyprus
- 4 October 2023
-
Working Paper Series - Issue No. 2850Details
- Abstract:
- This paper first provides empirical evidence that labour market outcomes for the less educated, who also tend to be poorer, are substantially more volatile than labour market outcomes for the well-educated, who tend to be richer. We estimate job finding rates and separation rates by educational attainment for several European countries and find that job finding rates are smaller and separation rates larger at lower educational attainment levels. At cyclical frequencies, fluctuations of the job finding rate explain up to 80% of the unemployment fluctuations for the less educated. We then construct a stylised HANK model augmented with search and matching and ex-ante heterogeneity in terms of educational attainment. We show that monetary policy has stronger effects when the job market for the less educated and hence poorer is more volatile. The reason is that these workers have the most procyclical income coupled with the highest marginal propensity to consume. An expansionary monetary policy shock that increases labour demand disproportionally affects the labour market segment for the less educated, causing a strong increase in their consumption. This further amplifies labour demand and increases labour income of the poor even more, amplifying the initial effect. The same mechanism carries over to forward guidance.
- JEL Code:
- E40,E52,J64
- 4 October 2023
-
Working Paper Series - Issue No. 2849Details
- Abstract:
- In this paper, we assess how risk-sharing channels have evolved over time in the United States and the Euro Area, and whether they have operated as ‘complements’ or ‘substitutes’. In particular, we focus on the capital channel (income from cross-border ownership of productive assets), the credit channel (interstate or cross-country bank lending), and the fiscal channel (federal or international fiscal transfers). We offer three main contributions. First, we propose a time-varying parameter panel VAR model, with stochastic volatility, which allows us to formally quantify time variation in risk-sharing channels. Second, we develop a new test of the complementarity vs. substitutability hypothesis of the three risk-sharing channels, based on the correlation between the impulse responses of these channels to idiosyncratic output shocks. Third, for the United States, we explain time variation in the risk-sharing channels based on some key macroeconomic and financial variables.
- JEL Code:
- C11,C33,E21,E32
- 4 October 2023
-
SpeechDetails
- Subtitle:
- Welcome address by Christine Lagarde, President of the ECB, at the ECB Conference on Monetary Policy: bridging science and practice
- 4 October 2023
-
MFI interest rate statistics
- 3 October 2023
-
SpeechDetails
- Subtitle:
- Slides by Philip R. Lane, Member of the Executive Board of the ECB, at the Bank of Lithuania Annual Economics Conference
- 2 October 2023
- 2 October 2023
-
Working Paper Series - Issue No. 2848Details
- Abstract:
- We propose a new measure of underlying inflation that informs, in real time, about asymmetric risks on the outlook of inflationary pressures. The asymmetries are generated through nonlinearities induced by economic activity. The new indicator is based on a multivariate regime-switching framework jointly estimated on disaggregated sub-components of the euro area HICP and has several additional advantages. First, it is able to swiftly infer abrupt changes in underlying inflation. Second, it helps to timely track turning points in underlying inflation. Third, the proposed indicator also has a satisfactory performance with respect to various criteria relevant for inflation monitoring.
- JEL Code:
- E17,E31,C11,C22,C24
- 2 October 2023
-
InterviewDetails
- Subtitle:
- Interview with Luis de Guindos, Vice-President of the ECB, conducted by Martin Arnold
- 29 September 2023
-
Governing Council decisions - Other decisions
- 29 September 2023
-
Working Paper Series - Issue No. 2847Details
- Abstract:
- This paper studies the design of Ramsey optimal monetary policy in a Health New Keynesian (HeNK) model with Susceptible, Infected and Recovered (SIR) agents. The nonlinear model is estimated with maximum likelihood techniques on Euro Area data. Our objective is to deconstruct the mechanism by which contagion risk affects the conduct of monetary policy. If monetary policy is the only game in town, we find that the optimal policy features significant deviations from price stability to mitigate the effect of the pandemic. The best outcome is obtained when the optimal Ramsey policy is combined with a lockdown strategy of medium intensity. In this case, monetary policy can concentrate on its price stabilization objective.
- JEL Code:
- E52,E32
- 29 September 2023
-
SpeechDetails
- Subtitle:
- Opening remarks by Christine Lagarde, President of the ECB, at the joint IEA-ECB-EIB High-Level International Conference on “Ensuring an orderly energy transition: Europe’s competitiveness and financial stability in a period of global energy transformation”
- 29 September 2023
- 28 September 2023
-
Economic Bulletin
- 28 September 2023
-
Economic Bulletin - BoxEconomic Bulletin Issue 6, 2023Details
- Abstract:
- This box looks at the impact of financial sector support measures on euro area public finances 15 years after the great financial crisis that led to widespread government assistance for the financial sector.
- JEL Code:
- H62,H63
- 28 September 2023
-
Economic Bulletin - BoxEconomic Bulletin Issue 6, 2023Details
- Abstract:
- This box describes liquidity conditions and the Eurosystem’s monetary policy operations during the third and fourth maintenance periods of 2023, from 10 May to 1 August 2023.
- JEL Code:
- E40,E52,E58
- 28 September 2023
-
Economic Bulletin - BoxEconomic Bulletin Issue 6, 2023Details
- Abstract:
- Consumer perceptions of the factors driving inflation can be an important determinant of their economic behaviour and inflation expectations. In this context, in June 2023 the ECB’s Consumer Expectations Survey asked consumers what they believed was the main factor driving changes in the general level of prices for goods and services in their country over the past 12 months. Most consumers believe that price changes over the past 12 months were mainly driven by input cost factors, with corporate profits ranked second and wages third. Consumers responding that other input costs are the main driver expect inflation to be less persistent. Consumer perceptions of the factors driving inflation should continue to be monitored. As the various drivers can influence inflation persistence differently, profits or wages being perceived as more prominent drivers in the future could have implications for consumers’ medium-term inflation expectations.
- JEL Code:
- D11,D84,E31
- 28 September 2023
-
Economic Bulletin - BoxEconomic Bulletin Issue 6, 2023Details
- Abstract:
- This box analyses the recent dispersion of economic activity across countries and sectors and assesses the role that reopening effects have played following the lifting of COVID-19 restrictions last year. The box shows that the dispersion of growth across euro area countries was still relatively high at the beginning of 2023, while the dispersion of growth across sectors was in line with pre-pandemic levels. The greater dispersion of growth across countries appears to be related to the continued higher dispersion of growth in contact-intensive services, which declined from the peak seen during the pandemic but remained at a historically high level, as contact-intensive services output continued to grow at a stronger pace in countries where contact-intensive services account for a larger share of the economy. According to an econometric model for the euro area as a whole, reopening effects remained a significant driver of the growth differential between manufacturing and contact-intensive services in the first quarter of 2023 but weakened overall compared with 2022. Over the course of 2023 the effects of the reopening of the economy should continue to fade and other forces, such as tighter financing conditions, should become more prominent.
- JEL Code:
- E32
- 28 September 2023
-
Economic Bulletin - BoxEconomic Bulletin Issue 6, 2023Details
- Abstract:
- After three years of below-average ocean surface temperatures, the arrival of El Niño this year implies risks to global food prices. El Niño is the warm phase of the temperature cycle in the East-Central tropical Pacific, when ocean surface temperatures exceed normal temperatures by at least 0.5 degrees Celsius. The effects of El Niño on climate patterns are complex, although the phenomenon is likely to put upward pressure on global food commodity prices due to higher risks of extreme weather events, which have already been taking place more frequently in recent years. The magnitude of the effect on global food commodity prices depends on the strength of the El Niño phenomenon. In turn, if current conditions develop into a strong El Niño, it could cause global food commodity prices to increase by up to 9%, with the strongest effects expected for soybeans, corn and rice. Accordingly, financial markets appeared to factor in future price increases for grains as well as higher uncertainty about future grain prices immediately after it was announced that El Niño conditions had arrived.
- JEL Code:
- Q02,Q17,Q54
- 28 September 2023
-
Economic Bulletin - ArticleEconomic Bulletin Issue 6, 2023Details
- Abstract:
- The survey on credit terms and conditions in euro-denominated securities financing and over-the-counter derivatives markets (SESFOD) is a qualitative survey which collects information on the credit terms and conditions offered by large banks active in the targeted euro-denominated markets. On the tenth anniversary of the launch of SESFOD in 2013, this article assesses the information value of the survey and its leading indicator properties. It analyses the underlying individual responses over time and the drivers of aggregate developments. While changes are infrequent, they may have highly significant effects on financial stability, market functioning and monetary policy. More specifically, information on changes in the cost and availability of funding in wholesale markets, and in repo markets in particular, may support the analysis of monetary policy transmission and interbank funding conditions.
- JEL Code:
- G10,G21,G23,C83
- 28 September 2023
-
Economic Bulletin - ArticleEconomic Bulletin Issue 6, 2023Details
- Abstract:
- In 2022, the euro area current account balance recorded a deficit of 0.8% of euro area GDP compared with a surplus of 2.8% of GDP in 2021. This deterioration of 3.6 percentage points is the biggest annual change in the euro area current account balance on record. This article reviews developments in the current account components. It shows that most of this deterioration is expected to be temporary as it was driven by a decline in the goods trade balance on the back of sharp increases in energy import prices. The euro area current account can therefore be expected to recover, driven by a partial rebound in the terms of trade, anticipated fiscal consolidation and largely unchanged demographic factors. However, as part of the increase in energy prices will probably persist over the medium term, the euro area current account balance is likely to stay somewhat below pre-pandemic levels.
- JEL Code:
- F32,F41
- 28 September 2023
-
Working Paper Series - Issue No. 2846Details
- Abstract:
- Leaks of confidential information emanating from public institutions have been the focus of a long-standing line of research. Yet, their determinants as well as their potential impact on public views and on policy effectiveness remain elusive. To address this gap, we study leaks from central banks because their effects are instantaneously reflected in financial markets. Based on a novel database of anonymous monetary policy leaks in the euro area as reported by newswires, we provide evidence that many of these leaks are likely placed by individual insiders with minority opinions. While we find that leaks have large effects on markets and weaken official policy announcements, our results also suggest that leaks do not lock in decision-makers, and that attributed communication can mitigate some of their effects.
- JEL Code:
- D83,E52,E58,G14,H83
- 28 September 2023
-
Working Paper Series - Issue No. 2845Details
- Abstract:
- We study the implications of climate change and the associated mitigation measures for optimal monetary policy in a canonical New Keynesian model with climate externalities. Provided they are set at their socially optimal level, carbon taxes pose no trade-offs for monetary policy: it is both feasible and optimal to fully stabilize inflation and the welfare-relevant output gap. More realistically, if carbon taxes are initially suboptimal, trade-offs arise between core and climate goals. These trade-offs however are resolved overwhelmingly in favor of price stability, even in scenarios of decades-long transition to optimal carbon taxation. This reflects the untargeted, inefficient nature of (conventional) monetary policy as a climate instrument. In a model extension with financial frictions and central bank purchases of corporate bonds, we show that green tilting of purchases is optimal and accelerates the green transition. However, its effect on CO2 emissions and global temperatures is limited by the small size of eligible bonds’ spreads.
- JEL Code:
- E31,E32,Q54,Q58
- Network:
- Challenges for Monetary Policy Transmission in a Changing World Network (ChaMP)
- 28 September 2023
-
The ECB BlogDetails
- JEL Code:
- O32,O33,E58
- Subtitle:
- From playing chess to piloting drones – machines have become much smarter and play a role in many areas of our lives. So why not use artificial intelligence for central banking? We are currently using this new technology for some tasks and exploring its future use for others. The ECB Blog gives you an overview.
- 27 September 2023
- 27 September 2023
-
Economic Bulletin - BoxEconomic Bulletin Issue 6, 2023Details
- Abstract:
- In a pilot round of the Survey on the Access to Finance of Enterprises (SAFE), conducted between 25 May and 26 June 2023, euro area firms were asked about climate change. Firms attach substantial importance to the potential negative impact from the physical risks of climate change. However, they are even more concerned about transition risks. Compared with physical risks, stricter climate standards provide a stronger incentive for firms to invest in climate change mitigation. Nonetheless, high financing costs and insufficient public subsidies are important obstacles to green investment. The results of the survey highlight the important role played by public loan guarantees and private sector funds in directing resources towards the greening of the economy.
- JEL Code:
- D22,Q54,E52
- 27 September 2023
-
Economic Bulletin - ArticleEconomic Bulletin Issue 6, 2023Details
- Abstract:
- This article considers how climate change will affect potential output – the highest level of production that an economy can sustain over the long run without driving up inflation. Higher temperatures and changing rainfall patterns are likely to negatively affect certain sectors, notably agriculture and tourism, and impair workers’ productivity. The green transition involves the reallocation of capital and labour across businesses and sectors. In the long run, the impact on potential output depends on the success of that reallocation and on the rate of progress of green innovation.
- JEL Code:
- D24,E24,J21,J22,O33,O40,R11,Q54,Q57
- 27 September 2023
-
Monetary developments in the euro areaAnnexes
- 27 September 2023
-
InterviewDetails
- Subtitle:
- Interview with Frank Elderson, Member of the Executive Board of the ECB and Vice-Chair of the Supervisory Board of the ECB, conducted by Luke Heighton on 22 September 2023
- 26 September 2023
-
Weekly financial statementAnnexes
- 26 September 2023
-
Weekly financial statement - Commentary
- 26 September 2023
-
Economic Bulletin - BoxEconomic Bulletin Issue 6, 2023Details
- Abstract:
- Banks distribute capital to equity investors either by paying dividends or by buying back shares. Such distributions of capital have ambiguous implications for monetary policy, since these lower banks’ cost of equity by signalling their soundness to investors but also reduce banks’ capital ratios and thus potentially their intermediation capacity. Since the end of the pandemic and the end of ECB Banking Supervision’s recommendation to refrain from or limit payouts, banks in the euro area have distributed capital at a rapid pace. Such distributions have been spearheaded by ambitious buyback programmes, catching up on forgone distributions in previous years, while a further increase in dividends is also likely. Payouts vary greatly across banks in terms of both overall size and composition. Individual banks tend to distribute more capital when they are more profitable and have better asset quality, capital ratios above their announced targets and more liquidity. They also tend to spread distributions over several years. We find that recent payouts have had a positive signalling effect on financial markets. Higher payout commitments have also been associated with lower bank credit supply and higher lending rates, therefore possibly contributing to the transmission of the ECB’s monetary policy tightening impulse so far.
- JEL Code:
- E51,E52,G21,G35
- 26 September 2023
-
SpeechDetails
- Subtitle:
- Welcome address (presentation slides) at the joint European Central Bank - Banque de France - Centre for Economic Policy Research conference "Monetary Policy Challenges for European Macroeconomies" in Paris
- 25 September 2023
-
SpeechDetails
- Subtitle:
- Speech by Christine Lagarde, President of the ECB, at the Hearing of the Committee on Economic and Monetary Affairs of the European Parliament
Annexes- 25 September 2023
- 25 September 2023
-
Speech
- 25 September 2023
-
SpeechDetails
- Subtitle:
- Thünen Lecture by Isabel Schnabel, Member of the Executive Board of the ECB, at the annual conference of the Verein für Socialpolitik
Annexes- 25 September 2023
-
Speech
- 25 September 2023
-
Working Paper Series - Issue No. 2844Details
- Abstract:
- We study a model in which policy aims at aggregate price stability. A fiscal imbalance materializes that, if uncorrected, must cause inflation, but the imbalance may get corrected in the future with some probability. By maintaining price stability in the near term, monetary policy can buy time for a correction to take place. The policy gamble may succeed, preserving price and fiscal stability, or fail, leading to a delayed, possibly large jump in the price level. The resulting dynamics resemble the models of a currency crisis following Krugman (1979) and Obstfeld (1986). Like in Obstfeld’s work, multiple equilibria arise naturally: whether or not price stability is preserved may depend on private agents’ expectations. The model can be reinterpreted as a model of partial default on public debt, in which case it is reminiscent of Calvo (1988).
- JEL Code:
- E31,F31,F41
- 25 September 2023
-
Economic Bulletin - BoxEconomic Bulletin Issue 6, 2023Details
- Abstract:
- The strong rebound in the labour force is a notable development in the euro area labour market and supported the resilient employment growth in recent quarters. In particular, over the last year and a half the main source of employment growth has been the strong inflow of people joining the labour force rather than a fall in the number of unemployed. This box provides an overview of recent euro area labour force developments, using data from Eurostat and the ECB Consumer Expectations Survey. It also analyses the drivers of the euro area labour force using a mixed-frequency Bayesian VAR to disentangle the push and pull factors behind the labour force dynamics.
- JEL Code:
- E24,J21
- 22 September 2023
-
InterviewDetails
- Subtitle:
- Interview with Philip R. Lane, Member of the Executive Board of the ECB, conducted by Jennifer Schonberger
- 22 September 2023
-
Letters to MEPs
- 22 September 2023
- 22 September 2023
- 21 September 2023
-
SpeechDetails
- Subtitle:
- Dinner speech by Philip R. Lane, Member of the Executive Board of the ECB, at the Money Marketeers of New York University
- 21 September 2023
-
SpeechDetails
- Subtitle:
- Speech by Christine Lagarde, President of the ECB, at the Mediterranean Meetings
- 20 September 2023
-
SpeechDetails
- Subtitle:
- Keynote speech by Frank Elderson, Member of the Executive Board of the ECB and Vice-Chair of the Supervisory Board of the ECB, Springtij Forum
- 20 September 2023
-
SpeechDetails
- Subtitle:
- Slides by Isabel Schnabel, Member of the Executive Board of the European Central Bank, at the Association of German Banks
- 20 September 2023
-
SpeechDetails
- Subtitle:
- Opening remarks by Fabio Panetta, Member of the Executive Board of the ECB, at the joint workshop of European independent fiscal institutions and the European System of Central Banks on “European fiscal policy and governance reform in uncertain times”
Annexes- 20 September 2023
- 20 September 2023
-
Research Bulletin - Issue No. 110Details
- Abstract:
- On the basis of insurance companies’ bond investments, I examine how shifts in investors’ demand for corporate bonds affect non-financial bond issuers. When demand for their bonds increases, firms’ financing costs decrease, which encourages them to increase their bond debt and invest more. These effects crucially depend on how credit-constrained firms are. My findings emphasise the critical role that institutional investors play in shaping non-financial firms’ financing decisions and real economic activity.
- JEL Code:
- G12,G22,G23,G3,G32
- 19 September 2023
-
Occasional Paper Series - Issue No. 329Details
- Abstract:
- This paper analyses banks’ ability to use capital buffers in the euro area, taking into account overlapping capital requirements between the risk-based capital framework and the leverage ratio capital framework from 2016 to 2022. This analysis is the first to quantify buffer usability in multiple jurisdictions and across various bank types, identify key drivers of buffer usability and assess the impact of various policy measures using longer time series. The paper shows that while both risk-based and leverage frameworks play a key role in enhancing the resilience of the banking system and ensuring financial stability, their simultaneous application creates interactions that may affect the functioning of capital buffers. In this regard, we investigate to what extent banks could have drawn down regulatory capital buffers in the risk-based framework without breaching current leverage ratio requirements, which is in line with the approach to buffer usability taken in ESRB (2021b). We show that buffer usability was partially constrained in the period examined and is expected to remain so under the current regulatory framework and if risk weight densities (RWDs) remain low. This finding indicates that the leverage ratio constitutes an effective backstop to the risk-based framework, both as regards minimum requirements and capital buffers. Limited buffer usability was identified especially for global systemically important institutions (G-SIIs) that rely largely on internal modelling approaches to calculate risk-based capital requirements, leading to comparably low risk weights and making the leverage ratio relatively more binding. Adding to previous contributions, we find that banks’ ability to use capital buffers fluctuated over time, generally increasing before 2019 and decreasing after the start of the coronavirus (COVID-19) pandemic, with substantial heterogeneity across countries. Furthermore, we provide new insights into the relationship between the RWD of a bank and its buffer usability and find that there is a critical RWD range between 25%
- JEL Code:
- G21,G28
- 19 September 2023
-
Weekly financial statementAnnexes
- 19 September 2023
-
Weekly financial statement - Commentary
- 19 September 2023
-
Balance of payments (monthly)
- 18 September 2023
-
Survey of Monetary Analysts - Aggregate results
- 15 September 2023
- 15 September 2023
- 15 September 2023
-
Press releaseAnnexes
- 15 September 2023
- 14 September 2023
-
PodcastRelated
- 14 September 2023
-
Monetary policy statement
- 14 September 2023
-
Macroeconomic projections for the euro areaAnnexes
- 14 September 2023
- 14 September 2023
-
Combined monetary policy decisions and statementRelated
- 14 September 2023
-
Monetary policy statement
- 14 September 2023
-
Monetary policy decision
- 14 September 2023
-
Monetary policy statementDetails
- Subtitle:
- Christine Lagarde, President of the ECB, Luis de Guindos, Vice-President of the ECB, Frankfurt am Main, 14 September 2023
Related- 14 September 2023
-
Combined monetary policy decisions and statement
- 14 September 2023
-
Monetary policy decision
- 14 September 2023
- 14 September 2023
-
Monetary policy decisionRelated
- 14 September 2023
-
Monetary policy statement
- 14 September 2023
-
Combined monetary policy decisions and statement
- 12 October 2023
-
Monetary policy account
- 13 September 2023
-
Press release
- 13 September 2023
- 13 September 2023
-
Euro area pension fund statisticsAnnexes
- 12 September 2023
-
Euro area pension fund statistics
- 12 September 2023
-
Occasional Paper Series - Issue No. 317Details
- Abstract:
- Large swings in cross-border capital flows can have consequences for domestic stability and open a channel for the transmission of shocks and spillovers across economies, including the euro area. Against this backdrop, the present paper reviews new evidence for the effectiveness of capital flow management policies in achieving macroeconomic and financial stability. Particular attention is paid to literature that has been used by the International Monetary Fund (IMF) to underpin its so-called Integrated Policy Framework, in which the roles of monetary, exchange rate, macroprudential and capital flow management policies are considered jointly. The literature published since the global financial crisis continues to affirm the effectiveness of capital flow management measures (CFMs) in addressing financial stability risks resulting from capital flow reversals; at the same time, however, it also continues to underscore that such policies should not substitute for warranted economic adjustments and structural reforms. Even so, recent literature also provides a case for considering, under certain circumstances, “precautionary” CFMs which could be applied to capital inflows to prevent a boom-and-bust cycle from being set in motion. This paper also highlights the need for further work on the long-term effects of such precautionary instruments, as well as their joint use with monetary policy instruments. Regarding capital flow management policies within the domain of central banks, the literature points to the usefulness of foreign exchange interventions (FXIs) in mitigating financial stability risks in countries with specific characteristics such as currency mismatches, borrowing constraints and shallow foreign exchange markets that are common to emerging market and developing economies alike. However, the literature also warns that such measures may reduce economic agents’ incentives to hedge against currency risks, with the result that unfavourable initial conditions beco
- JEL Code:
- F32,F38
- 12 September 2023
-
Weekly financial statementAnnexes
- 12 September 2023
-
Weekly financial statement - Commentary
- 12 September 2023
-
Digital Euro Investigation Phase - Scheme Rulebook Development Group documents
- 12 September 2023
-
Digital Euro Investigation Phase - Scheme Rulebook Development Group documents
- 6 September 2023
-
Occasional Paper Series - Issue No. 328Details
- Abstract:
- Transition to a carbon-neutral economy is necessary to limit the negative impact of climate change and has become one of the world’s most urgent priorities. This paper assesses the impact of three potential transition pathways, differing in the timing and level of ambition of emissions’ reduction, and quantifies the associated investment needs, economic costs and financial risks for corporates, households and financial institutions in the euro area. Building on the first ECB top-down, economy-wide climate stress test, this paper contributes to the field of climate stress testing by introducing three key innovations. First, the design of three short-term transition scenarios that combine the transition paths developed by the Network for Greening the Financial System (NGFS) with macroeconomic projections that allow for the latest energy-related developments. Second, the introduction of granular sectoral dynamics and energy-specific considerations by country relevant to transition risk. Finally, this paper provides a comprehensive analysis of the impact of transition risk on the euro area private sector and on the financial system, using a granular dataset that combines climate, energy-related and financial information for millions of firms with the euro area credit register and securities database and country-level data on households. By comparing different transition scenarios, the results of the exercise show that acting immediately and decisively would provide significant benefits for the euro area economy and financial system, not only by maintaining the optimal net-zero emissions path (and therefore limiting the physical impact of climate change), but also by limiting financial risk. An accelerated transition to a carbon-neutral economy would be helpful to contain risks for financial institutions and would not generate financial stability concerns for the euro area, provided that firms and households could finance their green investments in an orderly manner. However, the heterogeneous results across economic sectors and banks suggest that more careful monitoring of certain entity subsets and of credit exposures will be required during the transition process.
- JEL Code:
- C53,C55,G21,Q47,Q54
- 6 September 2023
- 6 September 2023
-
The ECB BlogDetails
- JEL Code:
- Q54,Q50
- Subtitle:
- Moving towards carbon neutrality as quickly and boldly as possible is by far the best way to slow down climate change. It may take more effort in the short run, but in the long run it will cost less overall, says ECB Vice-President Luis de Guindos. We need to reach carbon neutrality to avoid existential risks to nature, people and our economies. And we need to start making changes soon. Procrastinating may be easier and less costly today, but means we will pay a higher price tomorrow: the damage to our environment and economies from rising temperatures will be much more severe. In fact, the sooner and faster we complete the necessary green transition, the lower the overall costs and risks. This is one of the main outcomes of our second economy-wide climate stress test. Let me talk you through the findings.
- 5 September 2023
-
Disaggregated financial statement
- 5 September 2023
-
Weekly financial statementAnnexes
- 5 September 2023
-
Weekly financial statement - Commentary
- 5 September 2023
-
SpeechDetails
- Subtitle:
- Introductory remarks by Isabel Schnabel, Member of the Executive Board of the ECB, at the Legal Conference organised by the European Central Bank on “The incorporation of environmental considerations in the supervision of prudential risks”
- 5 September 2023
-
Press release
- 5 September 2023
-
Consumer Expectation Survey
- 5 September 2023
-
Consumer Expectation Survey
- 5 September 2023
-
Consumer Expectation Survey
- 5 September 2023
-
Consumer Expectation Survey
- 5 September 2023
-
InterviewDetails
- Subtitle:
- Interview with Philip R. Lane, Member of the Executive Board of the ECB, conducted by Stephen Kinsella on 31 August 2023
- 4 September 2023
-
SpeechDetails
- Subtitle:
- Speech by Christine Lagarde, President of the ECB, at the Distinguished Speakers Seminar organised by the European Economics & Financial Centre
- 4 September 2023
-
SpeechDetails
- Subtitle:
- Keynote speech by Frank Elderson, Member of the Executive Board of the ECB and Vice-Chair of the Supervisory Board of the ECB, at the ECB Legal Conference
- 4 September 2023
-
SpeechDetails
- Subtitle:
- Introductory statement by Fabio Panetta, Member of the Executive Board of the ECB, at the Committee on Economic and Monetary Affairs of the European Parliament
- 1 September 2023
-
MFI interest rate statistics
- 31 August 2023
-
Monetary policy accountRelated
- 27 July 2023
-
Monetary policy decision
- 31 August 2023
-
Euro area insurance corporations statisticsAnnexes
- 31 August 2023
-
Euro area insurance corporations statistics
- 31 August 2023
-
SpeechDetails
- Subtitle:
- Speech by Isabel Schnabel, Member of the Executive Board of the ECB, at a conference organised by the European Central Bank and the Federal Reserve Bank of Cleveland’s Center for Inflation Research on “Inflation: Drivers and Dynamics 2023”
Annexes- 31 August 2023
-
Speech
- 30 August 2023
-
The ECB BlogDetails
- JEL Code:
- E22,G23
- Subtitle:
- With rising geopolitical tensions and urgent global challenges such as the climate and digital transitions, Europe needs to bolster its resilience to shocks and invest strategically. In order to achieve this, we need to work together, as a more integrated Europe is better positioned to realize shared goals in a fragmented global economy.
- 29 August 2023
-
Weekly financial statementAnnexes
- 29 August 2023
-
Weekly financial statement - Commentary
- 28 August 2023
-
Survey of Monetary Analysts
- 28 August 2023
-
Monetary developments in the euro areaAnnexes
- 25 August 2023
-
SpeechDetails
- Subtitle:
- Speech by Christine Lagarde, President of the ECB, at the annual Economic Policy Symposium "Structural Shifts in the Global Economy" organised by Federal Reserve Bank of Kansas City in Jackson Hole
- 25 August 2023
-
Working Paper Series - Issue No. 2843Details
- Abstract:
- How should monetary policy respond to excessive capital in•ows that appreciate the currency and widen the external de•cit? Using the workhorse two-country open-macro model, we derive a quadratic approximation of the utility-based global loss function in incomplete market economies, and solve for the optimal targeting rules under cooperation. The optimal monetary stance is expansionary if the exchange rate pass-through (ERPT) on import prices is complete, contractionary if nominal rigidities attenuate ERPT. Excessive capital in•ows, however, may lead to currency undervaluation instead of overvaluation for some parameter values. The optimal stance is then invariably expansionary to support domestic demand.
- JEL Code:
- E44,E52,E61,F41,F42
- 24 August 2023
-
Working Paper Series - Issue No. 2842Details
- Abstract:
- This paper proposes a general statistical framework for systemic financial stress indices which measure the severity of financial crises on a continuous scale. Several index designs from the financial stress and systemic risk literature can be represented as special cases. We introduce an enhanced daily variant of the CISS (composite indicator of systemic stress) for the euro area and the US. The CISS aggregates a representative set of stress indicators using their time-varying cross-correlations as systemic risk weights, computationally similar to how portfolio risk is computed from the risk characteristics of individual assets. A boot-strap algorithm provides test statistics. Single-equation and system quantile growth-at-risk regressions show that the CISS has stronger effects in the lower tails of the growth distribu-tion. Simulations based on a quantile VAR suggest that systemic stress is a major driver of the Great Recession, while its contribution to the COVID-19 crisis appears to be small.
- JEL Code:
- C14,C31,C43,C53,E44,G01
- 24 August 2023
-
The ECB BlogDetails
- JEL Code:
- E50,E59
- Subtitle:
- Our money needs to be easy to handle, appealing and difficult to counterfeit. This ECB Blog post talks you through good banknote design – and seeks your advice.
- 23 August 2023
- 22 August 2023
-
Weekly financial statementAnnexes
- 22 August 2023
-
Weekly financial statement - Commentary
- 22 August 2023
-
Balance of payments (monthly)
- 18 August 2023
-
Working Paper Series - Issue No. 2841Details
- Abstract:
- We analyse the impact of the adoption of expected credit loss accounting (IFRS 9) on the timeliness and potential procyclicality of banks’ loan loss provisioning. We use granular loan-level data from the euro area’s credit register and investigate both firm-level credit events and macroeconomic shocks (2020 COVID-19 pandemic, 2022 energy price shock). We find that provisions under the new standard are higher before default and more responsive to shocks. However, the majority of provisioning still occurs at the time of default and the dynamics around default events are similar to pre-existing national standards. Additionally, banks with a larger capital headroom provision significantly more, particularly for loans using IFRS 9. This suggests a higher risk of underprovisioning for less capitalized banks.
- JEL Code:
- G21,G28,G32
- 17 August 2023
-
Euro area financial vehicle corporation statisticsAnnexes
- 17 August 2023
-
Euro area financial vehicle corporation statistics
- 17 August 2023
-
Euro area investment fund statisticsAnnexes
- 17 August 2023
-
Euro area investment fund statistics
- 16 August 2023
-
Occasional Paper Series - Issue No. 327Details
- Abstract:
- This investigation starts with the observation that, over the last decade, profitability rates reported by euro area (EA) banks have remained, on average, persistently below those reported by peer banks in the United States (US). In particular, banks’ return on equity (ROE) has fluctuated around 5% in the EA, but around 10% in the US, indicating a profitability gap of around 5 percentage points. However, while comparisons are frequently made between EA and US banks in academic and political debate, they are not perfect benchmarks, nor should this paper be regarded as aiming for a like-for-like comparison.
- JEL Code:
- G15,G21
- 16 August 2023
-
Forum on Central Banking - Conference proceedings
- 15 August 2023
-
Occasional Paper Series - Issue No. 326Details
- Abstract:
- How do central bank digital currencies (CBDC) impact the balance sheets of banks and central banks? To tackle this question empirically, we built a constraint optimisation model that allows for individual banks to choose how to respond to outflows of deposits, based on cost considerations and subject to the availability of reserves and collateral, within the individual banks and system wide, and for a given level of liquidity risk tolerance. We simulate the impact of a fictitious digital euro introduction in the third quarter of 2021, using data from over 2,000 euro area banks. That impact depends on i) the number of deposits withdrawn and the speed at which this occurs, ii) the liquidity available within the banking system at the time of the digital euro introduction, iii) the liquidity risk preferences of the markets and supervisors, iv) the bank’s business model, and v) the functioning of the interbank market. We find that a €3,000 digital euro holding limit per person, as suggested by Bindseil (2020) and Bindseil and Panetta (2020), would have been successful in containing the impact on bank liquidity risks and funding structures and on the Eurosystem balance sheet, even in extremely pessimistic scenarios.
- JEL Code:
- E52,E58,G21
- 15 August 2023
-
Weekly financial statementAnnexes
- 15 August 2023
-
Weekly financial statement - Commentary
- 10 August 2023
- 10 August 2023
-
Economic Bulletin
- 10 August 2023
-
Economic Bulletin - BoxEconomic Bulletin Issue 5, 2023Details
- Abstract:
- This box reviews Eurosystem staff projections of public wages, focusing on their response to inflation. It concludes that, after experiencing a large cut in real terms in 2022, public wages are projected to grow cumulatively over the period 2023-25 at rates higher than inflation. It also shows that projections of public wages reflect substantial heterogeneity at country level. Projected nominal public wage growth is stronger in countries that have experienced high levels of inflation in the recent past, even in the absence of institutional arrangements for automatic price indexation of public wages, but is more restrained in countries with high levels of public debt.
- JEL Code:
- E62,J3,H55
- 10 August 2023
-
Economic Bulletin - BoxEconomic Bulletin Issue 5, 2023Details
- Abstract:
- This box uses structural BVAR models applied to global macroeconomic data to provide evidence that monetary policy is transmitted more strongly to consumption in countries with higher shares of homeowners with mortgages, higher levels of household debt and higher shares of adjustable-rate mortgages, although the evidence for the latter is weaker. Since the previous hiking cycle, the shares of homeowners with mortgages and the levels of household debt have risen in the euro area, with countries increasingly resembling each other in this regard. This means that aggregate monetary policy transmission through the housing channel may, if anything, be stronger and more even across euro area countries in the current cycle than in past hiking cycles.
- JEL Code:
- E21,E44,E52,R21
- 10 August 2023
-
Economic Bulletin - BoxEconomic Bulletin Issue 5, 2023Details
- Abstract:
- The non-financial corporate bond market in the euro area has grown substantially over the past decade. The expansion in the supply of bonds was met with broad-based demand from all investor groups and accompanied by only a limited increase in corporate bond spreads. To better understand private sector demand for corporate bonds and its role in the price effects of changes in supply, this box studies the demand elasticities of individual sectors and the distribution of corporate bond holdings across the private sector. The findings, which focus on a low-yield period, suggest that insurance corporations and pension funds (ICPFs) play a special role in the corporate bond investor base: unlike other private sector investors, ICPFs demand fewer corporate bonds when their spreads increase, thereby potentially amplifying the price effects of shifts in supply. As the market share of ICPFs has fallen and that of other private sector investors has increased, the upward pressure on corporate bond spreads from unexpected increases in their supply, under low market stress, is estimated to have decreased.
- JEL Code:
- G11,G12
- 10 August 2023
-
Economic Bulletin - BoxEconomic Bulletin Issue 5, 2023Details
- Abstract:
- This box introduces experimental and analytical indicators for assessing climate change, which encompass three main categories: sustainable finance, carbon emissions and physical risks. The data remain under development and are, at this juncture, subject to caveats. The new indicators are a step towards supplying policymakers with appropriate information for assessing the exposure of financial institutions to climate change-related developments. Close interaction with stakeholders is important to this work, and the ECB is actively seeking feedback on the indicators.
- JEL Code:
- C8,Q50
- 10 August 2023
-
Economic Bulletin - BoxEconomic Bulletin Issue 5, 2023Details
- Abstract:
- Evidence from the ECB Consumer Expectations Survey (CES) shows that consumers’ expectations for interest rates on mortgages and savings accounts have increased, in line with actual interest rate developments. Since June 2022 an increasing share of respondents, particularly among those with an adjustable rate mortgage (ARM) which are generally more directly exposed to interest rate changes, has favoured lower interest rates. A growing share of households with an ARM also expects difficulties in meeting their mortgage payments in the near future and intends to refinance the mortgage contract. In line with their higher exposure to interest rate changes, spending expectations of respondents with an ARM are more sensitive to changes in expected interest rates. Overall, the results of the CES suggest that consumers have been progressively incorporating the impact of higher interest rates into their spending decisions.
- JEL Code:
- E03,E21,E52
- 9 August 2023
-
Economic Bulletin - ArticleEconomic Bulletin Issue 5, 2023Details
- Abstract:
- This article presents a model-based assessment of the short to medium-term economic impact of carbon pricing aimed at mitigating climate change. It addresses the high level of uncertainty in gauging the effects of carbon price increases by employing a suite of macroeconomic models. Under the main scenario, the loss in euro area annual GDP growth is contained and the inflation impact is modest, implying a limited output/inflation trade-off for monetary policy. The scenario supports the transition to a low-carbon economy, but the implied reduction in carbon emissions makes only a limited contribution to achieving the EU’s intermediate emission reduction target for 2030. Accordingly, reaching the EU’s climate goals will require a mixture of ambitious carbon pricing, additional regulatory action and technological innovation.
- JEL Code:
- C54,E52,E62,H23,Q43
- 9 August 2023
-
The ECB BlogDetails
- JEL Code:
- E52,E58,D53
- Subtitle:
- Words matter as much as actions for central banks. Because changes in tone can presage shifts in monetary policy. We have created an index to measure and compare the tone of policy communication by the ECB and the US Fed. This ECB Blog post talks you through the findings.
- 8 August 2023
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Weekly financial statementAnnexes
- 8 August 2023
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Weekly financial statement - Commentary
- 8 August 2023
-
Press release
- 8 August 2023
-
Consumer Expectation Survey
- 8 August 2023
-
Consumer Expectation Survey
- 8 August 2023
-
Consumer Expectation Survey
- 8 August 2023
-
Consumer Expectation Survey
- 8 August 2023
-
Economic Bulletin - BoxEconomic Bulletin Issue 5, 2023Details
- Abstract:
- This box analyses the factors determining household perceptions of the attractiveness of housing as an investment. It finds that these perceptions differ depending on the demographic and economic characteristics of households. Using a linear probability regression model, the box also shows that higher perceptions of housing as a good investment are associated with higher expectations for economic growth, personal income growth and house price growth, as well as lower expectations for inflation and mortgage rates. Combining the model estimates with the average expectations of households surveyed in the CES at each point in time, the box derives an expectations-based indicator of households’ perceptions of housing as a good investment. This indicator has declined significantly since June 2021, mainly driven by expectations of higher mortgage interest rates, reflecting the impact of tighter monetary policy and financial conditions in general.
- JEL Code:
- R2,R3
- 4 August 2023
- 4 August 2023
-
Working Paper Series - Issue No. 2840Details
- Abstract:
- We propose a Bayesian VAR model with stochastic volatility and time varying skewness to estimate the degree of labour at risk in the euro area and in the United States. We model the asymmetry of the shocks to changes in the unemployment rate as a function of real activity and financial risk factors. We find that the conditional distribution of the changes in the unemployment rate displays time-varying volatility and skewness, with peaks coinciding with the Global Financial Crisis and the COVID-19 pandemic. We take advantage of the multivariate nature of our parametric model to measure stagflation risk defined as the possible joint event of large increases in the unemployment rate and large annual rates of inflation. We find an increasing risk of stagflation for the euro area in 2022 while in the United States stagflation risk increased earlier in 2021 and started decreasing more recently. Notwithstanding the significantly high levels of inflation, stagflation risks have been contained by the resilient performance of the labour market in both areas. The degree of labour at risk is therefore important for the assessment of the inflation-unemployment trade-off.
- JEL Code:
- C32,C53,E24,E27
- 4 August 2023
-
Economic Bulletin - BoxEconomic Bulletin Issue 5, 2023Details
- Abstract:
- This box describes some key measures of underlying inflation and reassesses their predictive power for euro area headline inflation over a medium-term horizon. It discusses recent developments in underlying inflation and implications for the inflation outlook. It examines how underlying inflation measures can be adjusted to filter out some of the recent extraordinary shocks to inflation. Lastly, it analyses goods and services inflation individually.
- JEL Code:
- C52,E31,E52
- 3 August 2023
- 3 August 2023
-
SpeechDetails
- Subtitle:
- Speech by Fabio Panetta, Member of the Executive Board of the ECB, at Bocconi University
- 3 August 2023
-
Working Paper Series - Issue No. 2839Details
- Abstract:
- As countries and firms increasingly seek ways to strengthen the resilience of their supply chains, this paper studies the global economic costs of a decoupling of global supply chains along geopolitical lines as well as in strategic sectors. We explore not only the long-run effects, but also the short-run costs stemming from rigid wages and low substitutability across factors of production and input goods. We find that, in terms of welfare losses, the costs of decoupling are roughly five times higher in the short-run compared to the long-run, while country losses are heterogeneous. A reshaping of global supply chains increases the level of consumer prices in most countries, as well as producer prices, especially for trade-intensive manufacturing sectors. Global supply chain decoupling entails also a reallocation of labour across skill levels. Finally, global trade would decrease substantially, driven by lower trade in intermediate inputs and a higher reliance of countries on domestic production.
- JEL Code:
- F12,F13,F14,F51,F62
- 2 August 2023
-
Working Paper Series - Issue No. 2838Details
- Abstract:
- We provide new evidence on how ECB’s monetary policy decisions affect firms’ bank loan expectations in the euro area. We use firm-level data derived from the ECB Survey on the Access to Finance of Enterprises for the period 2009 to 2022 and identify the impact of monetary policy by comparing the responses of firms interviewed shortly before and after monetary policy shocks. Our results are as follows. First, we find that firms’ bank loan expectations react to monetary policy, with a contractionary shock leading to a downward revision of expectations. Second, we show that firms’ response depends on the size and the sign of the shock, with only large and contractionary shocks having a significant negative effect on expectations. Third, we observe that the different components of central bank communication (i.e. the pure monetary policy shock and the central bank information shock) have different impacts on firms’ beliefs. Fourth, we find that conventional and unconventional QE shocks have opposite effects on expectations, with the impact of QE policies mainly being driven by the central bank information component of the related announcements. Finally, we document that the response to monetary policy differs along firms’ structural characteristics.
- JEL Code:
- C83,D22,D84,E58
- 2 August 2023
-
Working Paper Series - Issue No. 2837Details
- Abstract:
- We empirically investigated the impact of regulatory risk retention methods on credit ratings and pricing at issuance using a sample of European securitization tranches issued in the period 2011-2021. European regulation is based on the assumption that all risk retention methods homogenously align incentives and interests between originators and investors. We investigated the impact of these methods on the pricing of securitization tranches and found that investors adjust the risk premium at issuance for tranches based on different risk retention methods. We also found that credit ratings (discrepancy) differed depending on the risk retention method used. Finally, we gained a deeper insight into the risk retention methods chosen over time and concluded that originators take deal complexity and capital relief characteristics into consideration when selecting a specific method.
- JEL Code:
- G12,G21,G24,G28
- 2 August 2023
-
The ECB BlogDetails
- JEL Code:
- G20,G28
- Subtitle:
- Policymakers should focus on preserving bank resilience to strengthen macroprudential stability at a time of economic uncertainty. This would ensure that sufficient capital buffers are available should widespread losses arise, argues ECB Vice-President Luis de Guindos.
- 2 August 2023
-
MFI interest rate statistics
- 1 August 2023
-
Disaggregated financial statement
- 1 August 2023
-
Weekly financial statementAnnexes
- 1 August 2023
-
Weekly financial statement - Commentary
- 1 August 2023
-
Working Paper Series - Issue No. 2836Details
- Abstract:
- We nowcast world trade using machine learning, distinguishing between tree-based methods (random forest, gradient boosting) and their regression-based counterparts (macroeconomic random forest, linear gradient boosting). While much less used in the literature, the latter are found to outperform not only the tree-based techniques, but also more “traditional” linear and non-linear techniques (OLS, Markov-switching, quantile regression). They do so significantly and consistently across different horizons and real-time datasets. To further improve performances when forecasting with machine learning, we propose a flexible three-step approach composed of (step 1) pre-selection, (step 2) factor extraction and (step 3) machine learning regression. We find that both pre-selection and factor extraction significantly improve the accuracy of machine-learning-based predictions. This three-step approach also outperforms workhorse benchmarks, such as a PCA-OLS model, an elastic net, or a dynamic factor model. Finally, on top of high accuracy, the approach is flexible and can be extended seamlessly beyond world trade.
- JEL Code:
- C53,C55,E37
- 1 August 2023
-
Working Paper Series - Issue No. 2835Details
- Abstract:
- We develop a model to examine how discount rates affect the nature and composition of innovation within an industry. Challenging conventional wisdom, we show that higher discount rates do not discourage firm innovation when accounting for the industry equilibrium. Higher discount rates deter fresh entry—effectively acting as entry barriers—but encourage innovation through the intensive margin, which can lead to a higher industry innovation rate on net. Simultaneously, high discount rates foster explorative over exploitative innovation. The model rationalizes observed patterns of innovation cyclicality, and predicts that lower entry in downturns hedges innovating incumbents against higher discount rates.
- JEL Code:
- G31,G12,O31
- 1 August 2023
-
€STR Transparency on errors
- 31 July 2023
-
Working Paper Series - Issue No. 2834Details
- Abstract:
- We use a Bayesian Threshold Vector Autoregression model identified through sign and narrative restrictions to uncover non-linearities in the propagation of energy supply shocks. We find that the transmission of energy supply shocks on consumer prices is stronger in high-inflation regimes, supporting state-dependent models. The faster pass-thorough of energy supply shocks to consumer prices (excl. energy) cushions the drop in output in the short term. Energy supply shocks have a stronger impact on output in the medium-term with manufacturing being more adversely affected than GDP. Large energy supply shocks shift the economy to another state but after two and half years the mean-reversion to lower inflation implies a more moderate transmission mechanism, highlighting the importance of state-dependent impulse responses. The energy supply shocks between July 2021 and June 2022 are massive amounting to 3.9 standard deviations on average each month.
- JEL Code:
- C32,E32
- 31 July 2023
-
Working Paper Series - Issue No. 2833Details
- Abstract:
- We propose a novel empirical approach to inform monetary policymakers about the potential effects of policy action when facing trade-offs between financial and macroeconomic stability. We estimate a quantile vector autoregression (QVAR) for the euro area covering the real economy, monetary policy and measures of ex ante and ex post systemic risk representing financial stability. Policy implications are derived from scenario analyses where the associated costs and benefits are functions of the projected paths of the potentially asymmetric distributions of inflation and economic growth, allowing us to take a risk management perspective. One exercise considers the intertemporal financial stability trade-off in the context of the global financial crisis, where we find ex post evidence in favour of monetary policy leaning against the financial cycle. Another exercise considers the short-term financial stability trade-off when deciding the appropriate speed of monetary policy tightening to combat inflationary pressures in a fragile financial environment.
- JEL Code:
- C32,E37,E44,E52,G01
- 31 July 2023
-
Survey of Monetary Analysts - Aggregate results
- 30 July 2023
-
InterviewDetails
- Subtitle:
- Interview with Christine Lagarde, President of the ECB, conducted by Anne Cheyvialle and Florentin Collomp on 28 July 2023
- 28 July 2023
- 28 July 2023
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Letters to MEPs
- 28 July 2023
-
Governing Council decisions - Other decisions
- 28 July 2023
-
Press releaseRelated
- 28 July 2023
-
Survey of Professional Forecasters
- 28 July 2023
-
Survey of Professional ForecastersAnnexes
- 28 July 2023
Related- 28 July 2023
- 28 July 2023
-
Economic Bulletin - BoxEconomic Bulletin Issue 5, 2023Details
- Abstract:
- This box summarises the findings of recent contacts between ECB staff and representatives of 73 leading non-financial companies operating in the euro area. According to these exchanges, which took place between 26 June and 5 July, aggregate activity continued to stagnate in the second quarter of 2023, with differences across sectors still notable. Activity declined in the construction and intermediate goods sectors and in related transport and logistics services. However, consumer spending was proving more resilient than many expected. The growth rate of selling prices continued to decelerate, especially in the industrial sector, as non-labour input costs stabilised. Expectations for wage growth remained strong but showed some signs of moderation when looking forwards to 2024.
- JEL Code:
- E2,E3,L2
- 27 July 2023
- 27 July 2023
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Press releaseRelated
- 27 July 2023
-
Monetary policy decision
- 27 July 2023
-
Combined monetary policy decisions and statementRelated
- 27 July 2023
-
Monetary policy statement
- 27 July 2023
-
Monetary policy decision
- 27 July 2023
-
Monetary policy statementDetails
- Subtitle:
- Christine Lagarde, President of the ECB,Luis de Guindos, Vice-President of the ECB, Frankfurt am Main, 27 July 2023
Related- 27 July 2023
-
Combined monetary policy decisions and statement
- 27 July 2023
-
Monetary policy decisionRelated
- 27 July 2023
-
Combined monetary policy decisions and statement
- 27 July 2023
-
Press release
- 31 August 2023
-
Monetary policy account
- 27 July 2023
-
Euro area economic and financial developments by institutional sector (full)
- 26 July 2023
-
Monetary developments in the euro areaAnnexes
- 26 July 2023
-
Monetary developments in the euro area
- 25 July 2023
-
Weekly financial statementAnnexes
- 25 July 2023
-
Weekly financial statement - Commentary
- 25 July 2023
-
Press releaseRelated
- 25 July 2023
-
Euro area bank lending survey
- 25 July 2023
-
Euro area bank lending surveyAnnexes
- 25 July 2023
-
Euro area bank lending survey - Annex
Related- 25 July 2023
-
Press release
- 20 July 2023
-
Statistics Paper Series - Issue No. 46Details
- Abstract:
- This report summarises the stylized facts from the fourth wave of the Eurosystem Household Finance and Consumption Survey, which provides household-level data collected in a harmonised way in all 19 euro area countries, as well as in the Czech Republic, Croatia and Hungary for a sample of more than 83,000 households. Although the survey does not refer to the same time period in all countries, the most common reference period for the data is 2021. The report presents results on household assets and liabilities, income, and indicators of consumption and credit constraints
- Network:
- Household Finance and Consumption Network (HFCN)
- 20 July 2023
-
Statistics Paper Series - Issue No. 45Details
- Abstract:
- This report summarises the methodologies used in the fourth wave of the Eurosystem Household Finance and Consumption Survey, which provides household-level data collected in a harmonised way in all 19 euro area countries, as well as in the Czech Republic, Croatia and Hungary. The total sample size is composed of more than 83,000 households. Although the survey does not refer to the same time period in all countries, the most common reference period for the data is 2021. The report presents the methodologies applied in areas such as data collection, sample design, weighting, imputation, and variance estimation. It also addresses statistical disclosure control issues and analyses issues that may have an effect on the comparability of the survey data across countries and across waves.
- Network:
- Household Finance and Consumption Network (HFCN)
- 20 July 2023
-
Balance of payments (monthly)
- 19 July 2023
-
Working Paper Series - Issue No. 2832Details
- Abstract:
- The Global Financial Crisis established that policymakers should consider the stage of the financial cycle to better evaluate the cyclical position of the economy when designing monetary policy decisions. If financial variables are omitted from the estimations of the output gap, a common and unobserved indicator of the business cycle, important financial or external imbalances that may lead to future recessions may not be captured. This paper presents a suite of estimates of output gaps incorporating financial variables. The estimates are based both on small unobserved components models and a large unobserved components model that follows a production function approach. The results show that exploiting the information content of financial variables, which co-move strongly with the output cycle, can sometimes improve output gap estimates. However, these improvements are of a limited magnitude and very sensitive to the choice of the chosen financial variables.
- JEL Code:
- C32,E32,E44,E47,E52
- 18 July 2023
-
Weekly financial statementAnnexes
- 18 July 2023
-
Weekly financial statement - Commentary
- 18 July 2023
-
Digital Euro Investigation Phase - Scheme Rulebook Development Group documents
- 18 July 2023
-
Digital Euro Investigation Phase - Scheme Rulebook Development Group documents
- 18 July 2023
-
T2S financial statement
- 17 July 2023
-
SpeechDetails
- Subtitle:
- Welcome address by Christine Lagarde, President of the ECB, at the 9th ECB conference on central, eastern and south-eastern European countries
- 17 July 2023
-
Research Bulletin - Issue No. 109Details
- Abstract:
- Regulation to control carbon emissions challenges firms to develop optimal carbon management policies. We set out a unified approach to study the trade-offs carbon pricing poses for firms and how they should therefore best respond. Our model shows that while carbon pricing curtails firms’ carbon emissions, polluting firms tilt their green investment mix towards more immediate yet short-lived options – such as solely reducing emissions (abatement) instead of investing in green innovation – as it becomes costlier to comply. Under emissions trading systems, larger balances of carbon credits dampen firms’ efforts to reduce their carbon emissions. Our analysis reveals that carbon regulation does not necessarily reduce shareholder value if firms are sufficiently committed to reducing their carbon footprint.
- JEL Code:
- G30,G31,O30,D62
- 16 July 2023
-
Occasional Paper Series - Issue No. 325Details
- Abstract:
- Inflation affects the purchasing power of households. This paper documents large, idiosyncratic inflation differences between households in their everyday shopping. Low-income households have experienced higher inflation in the last ten years, but the difference to richer households has been small and time varying. Household-specific behaviour appears to dominate inflation differences within countries. Between countries, multinational retail chains not only differentiate products by branding, but also charge different prices for identical products. Retailers continue to differentiate prices along national borders, even within largely integrated economic regions. Price changes, however, are broadly aligned across borders within the same retailers.
- JEL Code:
- D12,D3,D43,E31,F15,F4
- 16 July 2023
-
Occasional Paper Series - Issue No. 324Details
- Abstract:
- The coronavirus (COVID-19) pandemic caused a deep recession globally, as well as in the euro area, accompanied by a steep decline in inflation rates in 2020. This paper reviews some of the main challenges created by the pandemic for inflation measurement and provides micro price data analysis of how price setting has reacted to the strong COVID-19 shock. For this purpose, we use three different, but complementary, microdata sources for specific countries and sectors: micro price data underlying the official consumer price indices in Germany, Italy, Latvia and Slovakia; (scanner) data from German and Italian supermarkets; and online (web-scraped) prices for Poland. A common finding of the micro price studies in this paper is that state dependence significantly contributed to the price-setting response to the COVID-19 shock. Nevertheless, the extent and degree of responses varies widely by sector and even country, also depending on the severity of the pandemic situation.
- JEL Code:
- D4,E31
- 16 July 2023
-
Occasional Paper Series - Issue No. 323Details
- Abstract:
- This paper provides an extensive literature review and analyses some open issues in the measurement of inflation that can only be explored in depth using micro price data. It builds on the analysis done in the context of the ECB’s strategy review, which pointed at directions for improvement of the Harmonised Index of Consumer Prices (HICP), including better quantification of potential biases. Two such biases are the substitution bias and the quality adjustment bias. Most analyses of substitution bias rest on the concept of the cost of living, positing that preferences are stable, homogeneous and homothetic. Consumer behaviour is characterised by preference shifts and heterogeneity, which influence the measurement of the cost of living and substitution bias. Climate change may make the impact of preference shifts particularly relevant as it causes the introduction of new varieties of “green” goods and services (zero-kilometre food, sustainable tourism) and a shift from “brown” to “green” products. Furthermore, PRISMA data show that consumption baskets and thus inflation vary across income classes (e.g. higher-income households tend to buy more expensive goods), pointing to non-homotheticity of preferences. When preferences are heterogeneous and/or non-homothetic, it is important to monitor different experiences of inflation across classes of consumers/citizens. This is particularly important when very large relative price changes affect items that enter the consumption baskets of the rich and the poor, the young and the old, in very different proportions. Another open area of analysis concerns the impact of quality adjustment on measured inflation. Evidence based on web-scraped prices shows that the various implicit quality adjustment methods can produce widely varying inflation trends when product churn is fast. In the euro area specifically, using different quality adjustment methods can be an overlooked source of divergent inflation trends in sub-categories, and, if pervasive, shows up in overall measured inflation divergence across countries.
- JEL Code:
- E31
- 16 July 2023
-
Occasional Paper Series - Issue No. 322Details
- Abstract:
- This paper discusses the normative implications of the micro evidence on heterogeneity in price setting gathered by the Price-setting Microdata Analysis Network (PRISMA) for the level of inflation that central banks should target. The micro price data underlying the consumer price index are used to estimate relative price trends over the product life cycle. Minimising the welfare consequences of relative price distortions in the presence of these trends requires targeting a significantly positive inflation rate in France, Germany and Italy: the steady-state inflation rate, jointly maximising welfare in all three countries, ranges from 1.1% to 1.7%. Other considerations not taken into account in the present paper may push up optimal inflation targets further. The welfare costs of targeting an inflation rate of zero, as suggested by monetary models ignoring relative price trends, or of targeting 4%, turn out to be substantial.
- JEL Code:
- E31,E52
- 16 July 2023
-
Occasional Paper Series - Issue No. 321Details
- Abstract:
- This paper analyses the implications of the evidence on micro price setting gathered by Price-setting Microdata Analysis Network (PRISMA) for inflation dynamics and monetary policy, relying on calibrated models and direct empirical evidence. According to models calibrated to the euro area micro evidence in Gautier et al. (2022, 2023), infrequent price changes and moderate state dependence in price setting should result in a meaningful Phillips curve in the euro area. Empirical estimates of the Phillips curve during the low-inflation period confirm previous findings of a relatively flat but stable slope. This estimated flat slope reflects both infrequent and subdued price adjustment in response to aggregate shocks, i.e. the presence of nominal and real rigidities. Model-based simulations show that, due to non-linearities in price setting, changes in trend inflation above 5-6% would have significant effects on the euro area Phillips curve. Similarly, shocks to nominal costs larger than 15% would result in non-linear effects on inflation dynamics in calibrated models. In line with these simulations, recent micro evidence suggests that the return of higher and more volatile inflation seems to be associated with higher frequencies of price changes, mainly because the frequency of price increases rises with the level and volatility of inflation.
- JEL Code:
- E3,E5
- 16 July 2023
-
Occasional Paper Series - Issue No. 320Details
- Abstract:
- E-commerce has become more prevalent throughout Europe in the last decade. The coronavirus (COVID-19) pandemic accelerated this trend, particularly in the retail sector. This paper focuses on the implications of increasing business-to-consumer e-commerce for prices and inflation in the euro area. It highlights three key results. First, whether online prices and inflation are higher or lower than their offline counterparts depends on the distribution model, the sector and the country. Moreover, properly selected online prices track official inflation indices even in real time. Second, the effect of e-commerce on inflation appears to be transient and differs between countries. However, as the penetration of some markets is still low, these transitory effects will likely persist at the euro area level for several years. Third, online prices change more frequently than offline prices. This might lead to greater price flexibility overall as online trade gains market share in a growing number of sectors.
- JEL Code:
- D4,E31,L11
- 16 July 2023
-
Occasional Paper Series - Issue No. 319Details
- Abstract:
- This paper documents five stylised facts relating to price adjustment in the euro area, using various micro price datasets collected in a period with relatively low and stable inflation. First, price changes are infrequent in the core sectors. On average, 12% of consumer prices change each month, falling to 8.5% when sales prices are excluded. The frequency of producer price adjustment is greater (25%), reflecting that the prices of intermediate goods and energy are more flexible. For both consumer and producer prices, cross-sectoral heterogeneity is more pronounced than cross-country heterogeneity. Second, price changes tend to be large and heterogeneous. For consumer prices, the typical absolute price change is about 10%, and the distribution of price changes shows a broad dispersion. For producer prices, the typical absolute price change is smaller, but nevertheless larger than inflation. Third, price setting is mildly state-dependent: the probability of price adjustment rises with the size of price misalignment, mainly reflecting idiosyncratic shocks, but it does not increase very sharply. Fourth, for both consumer and producer prices, the repricing rate showed no trend in the period 2005-19 but was more volatile in the short run. Fifth, small cyclical variations in frequency did not contribute much to fluctuations in aggregate inflation, which instead mainly reflected shifts in the average size of price changes. Consistent with idiosyncratic shocks as the main driver of price changes, aggregate disturbances affected inflation by shifting the relative number of firms increasing or decreasing their prices, rather than the size of price increases and decreases.
- JEL Code:
- E3,E5
- 14 July 2023
-
Working Paper Series - Issue No. 2831Details
- Abstract:
- We examine the link between labour market developments and new technologies such as artificial intelligence (AI) and software in 16 European countries over the period 2011-2019. Using data for occupations at the 3-digit level in Europe, we find that on average employment shares have increased in occupations more exposed to AI. This is particularly the case for occupations with a relatively higher proportion of younger and skilled workers. This evidence is in line with the Skill Biased Technological Change theory. While there exists heterogeneity across countries, only very few countries show a decline in employment shares of occupations more exposed to AI-enabled automation. Country heterogeneity for this result seems to be linked to the pace of technology diffusion and education, but also to the level of product market regulation (competition) and employment protection laws. In contrast to the findings for employment, we find little evidence for a relationship between wages and potential exposures to new technologies.
- JEL Code:
- J23,O33
- 14 July 2023
-
Working Paper Series - Issue No. 2830Details
- Abstract:
- Density forecasts of euro area inflation are a fundamental input for a medium-term oriented central bank, such as the European Central Bank (ECB). We show that a quantile regression forest, capturing a general non-linear relationship between euro area (headline and core) inflation and a large set of determinants, is competitive with state-of-the-art linear benchmarks and judgemental survey forecasts. The median forecasts of the quantile regression forest are very collinear with the ECB point inflation forecasts, displaying similar deviations from “linearity”. Given that the ECB modelling toolbox is overwhelmingly linear, this finding suggests that the expert judgement embedded in the ECB forecast may be characterized by some mild non-linearity.
- JEL Code:
- C52,C53,E31,E37
- 13 July 2023
- 13 July 2023
-
Digital Euro Investigation Phase - Progress Report
- 13 July 2023
-
Monetary policy accountRelated
- 15 June 2023
-
Monetary policy decision
- 13 July 2023
-
Working Paper Series - Issue No. 2829Details
- Abstract:
- Life insurers sell savings contracts with surrender options, which allow policyholders to prematurely receive guaranteed surrender values. These surrender options move toward the money when interest rates rise. Hence, higher interest rates raise surrender rates, as we document empirically by exploiting plausibly exogenous variation in monetary policy. Using a calibrated model, we then estimate that surrender options would force insurers to sell up to 2% of their investments during an enduring interest rate rise of 25 bps per year. We show that these fire sales are fueled by surrender value guarantees and insurers’ long-term investments.
- JEL Code:
- G22,E44,E52,G52
- 13 July 2023
-
Working Paper Series - Issue No. 2828Details
- Abstract:
- Based on a non-linear equilibrium model of the banking sector with an occasionally-binding equity issuance constraint, we show that the economic impact of changes in bank capital requirements depends on the state of the macro-financial environment. In ”normal” states where banks do not face problems to retain enough profits to satisfy higher capital requirements, the impact on bank loan supply works through a ”pricing channel” which is small: around 0.1% less loans for a 1pp increase in capital requirements. In ”bad” states where banks are not able to come up with sufficient equity to satisfy capital requirements, the impact on loan supply works through a ”quantity channel”, which acts like a financial accelerator and can be very large: up to 10% more loans for a capital requirement release of 1pp. Compared to existing DSGE models with a banking sector, which usually feature a constant lending response of around 1%, our state-dependent impact is an order of magnitude lower in ”normal” states and an order of magnitude higher in ”bad” states. Our results provide a theoretical justification for building up a positive countercyclical capital buffer in ”normal” macro-financial environments.
- JEL Code:
- D21,E44,E51,G21,G28
- 13 July 2023
- 12 July 2023
-
SpeechDetails
- Subtitle:
- Remarks by Philip R. Lane, Member of the Executive Board of the ECB, at the Panel Discussion on Banking Solvency and Monetary Policy, NBER Summer Institute 2023 Macro, Money and Financial Frictions Workshop
Annexes- 12 July 2023
-
Speech
- 12 July 2023
-
The ECB BlogDetails
- JEL Code:
- F60,F18
- Subtitle:
- After decades of being both hero and villain, globalisation is said to be on the retreat. There is a common perception that companies are diversifying supply chains and relocating business closer to home. So, are we heading towards deglobalisation? We dig deeper and find that the data tell a different story.
- 11 July 2023
-
Weekly financial statementAnnexes
- 11 July 2023
-
Weekly financial statement - Commentary
- 10 July 2023
- 10 July 2023
-
Press releaseRelated
- 10 July 2023
- 10 July 2023
-
Other publicationRelated
- 10 July 2023
-
Press release
- 10 July 2023
-
Survey of Monetary Analysts
- 7 July 2023
-
SpeechDetails
- Subtitle:
- Keynote speech by Luis de Guindos, Vice-President of the ECB, at King’s College London
Annexes- 7 July 2023
-
Speech
- 7 July 2023
-
InterviewDetails
- Subtitle:
- Interview with Christine Lagarde, President of the ECB, conducted by Geneviève Van Lède on 5 July 2023
- 6 July 2023
- 5 July 2023
-
Disaggregated financial statement
- 5 July 2023
-
Weekly financial statementAnnexes
- 5 July 2023
-
Weekly financial statement - Commentary
- 5 July 2023
-
The ECB BlogDetails
- JEL Code:
- E17,E27,E37,E47
- Subtitle:
- Central banks need to look ahead to make good decisions. Since we lack a crystal ball, economic models are the best tool available. They provide a test environment to craft and think through different scenarios. This ECB Blog post provides an overview of why, and how, we do this.
- 5 July 2023
-
MFI interest rate statistics
- 5 July 2023
-
Press release
- 5 July 2023
-
Consumer Expectation Survey
- 5 July 2023
-
Consumer Expectation Survey
- 5 July 2023
-
Consumer Expectation Survey
- 5 July 2023
-
Consumer Expectation Survey
- 4 July 2023
-
Working Paper Series - Issue No. 2827Details
- Abstract:
- We solve a real business cycle model with rational inattention (an RI-RBC model). In the RIRBC model, the growth rates of employment, investment, and output are about as persistent as in the data, with an amount of inattention consistent with survey data on expectations. Moreover, consumption, employment, and output move in the same direction in response to news about future productivity. By contrast, the baseline RBC model produces neither persistent growth rates nor business cycle comovement after news shocks.
- JEL Code:
- D83,E32,E71
- 4 July 2023
-
Press releaseRelated
- 4 July 2023
-
Survey on credit terms and conditions in euro-denominated securities financing and OTC derivatives markets
- 4 July 2023
-
Euro area economic and financial developments by institutional sector (early)
- 4 July 2023
-
Balance of payments (quarterly)
- 3 July 2023
-
Macroprudential Bulletin - Article - Issue No. 22Details
- Abstract:
- This article discusses the role of macroprudential policy in the current environment. Although the euro area financial cycle is turning, banks remain profitable, vulnerabilities are still elevated, and financial stability risks have not yet materialised. Against this backdrop, macroprudential policy should not be loosened but should instead focus on preserving the resilience of banks and borrowers.
- JEL Code:
- G01,G21,G38,E58
- 3 July 2023
-
Macroprudential Bulletin - Focus - Issue No. 22Details
- Abstract:
- Long-term trends in loan-to-value (LTV), debt-to-income (DTI) and debt-service-to-income (DSTI) ratios started to reverse in 2022. Higher interest rates in combination with elevated house prices are pushing up servicing costs for mortgages, resulting in higher shares of new loans with DSTIs over 30%. In countries with regulatory caps on monthly mortgage repayment ratios, an increasing share of new loans have DSTIs close to the limits. However, banks are not making full use of the flexibility allowed to them to lend above the DSTI limits, suggesting the measures in place are not excessively constraining lending.
- JEL Code:
- G21,G51,R30
- 3 July 2023
-
Macroprudential Bulletin - Focus - Issue No. 22Details
- Abstract:
- Macroprudential policy should remain focused on maintaining capital buffers in the absence of widespread materialisation of financial stability risks. Given that the financial cycle continues to turn, this box provides a general overview of the factors that could inform potential buffer releases in the future and examines indicators and conditions under which buffer releases might be considered.
- JEL Code:
- G01,G21,E58
- 29 June 2023
-
Economic Bulletin
- 29 June 2023
-
Economic Bulletin - BoxEconomic Bulletin Issue 4, 2023Details
- Abstract:
- This box provides an analysis of the retrenchment recorded in euro area external financial flows in 2022 – the largest since the global financial crisis – making use of new, more granular data published in the euro area balance of payments and international investment position statistics. The retrenchment was most pronounced in portfolio and foreign direct investment (FDI) flows. Euro area investors’ retrenchment in portfolio investment in 2022 was mainly driven by investment funds, while insurance corporations and pension funds offset the reversal in outflows to some extent. As regards foreign portfolio investment in the euro area in 2022, net purchases of euro area investment fund shares dried up almost completely, while foreign investors’ appetite for euro area debt securities started to return. The retrenchment in FDI mainly reflected “financialised” transactions by multinational enterprises vis-à-vis affiliated “other financial institutions” in euro area financial centres, while FDI flows to the non-financial corporate sector remained more stable.
- JEL Code:
- F32,F41
- 29 June 2023
-
Economic Bulletin - BoxEconomic Bulletin Issue 4, 2023Details
- Abstract:
- According to the recent Survey on the Access to Finance of Enterprises (SAFE), conducted between 6 March and 14 April 2023, euro area firms expect their selling prices to increase on average by 6.1% over the next 12 months. Selling price increases are expected to be higher for firms in the retail sector than for those in the non-retail sector. Input costs (mainly related to materials and energy) and financing costs are important factors for all firms when setting future selling prices. For firms in both the retail and non-retail sectors, expected increases in selling prices are higher for firms that anticipate an increase in their turnover. Manufacturing firms with higher past producer price increases expect a smaller increase in future selling prices over the next 12 months.
- JEL Code:
- D22,D84,E52
- 29 June 2023
-
Economic Bulletin - BoxEconomic Bulletin Issue 4, 2023Details
- Abstract:
- This box examines the wage share in the euro area, which has edged down since the start of the pandemic, as workers have so far not been able to recover real wage losses amidst high inflation and robust profit margins. The decline is in most sectors, except for less contact-intensive private services and public services. The reduced wage share suggests that part of the recent terms-of-trade shock and its impact on consumer price inflation has been absorbed by workers and that second-round effects from wages on inflation have so far been relatively moderate.
- JEL Code:
- E24,E25,E31,E37
- 29 June 2023
-
Economic Bulletin - BoxEconomic Bulletin Issue 4, 2023Details
- Abstract:
- The box provides an analysis of the recent increase in inflation differentials in the euro area countries and its impact on price competitiveness. To a certain extent, inflation differentials are normal in a currency union, insofar as they reflect temporary adjustments to shocks or are associated with catching-up processes. However, in other cases, inflation differentials may reflect persistent diverging cost developments, possibly related to a spillover of energy and/or food price shocks into labour cost differentials, or structural challenges such as nominal and real rigidities in product and labour markets. In such cases, inflation differentials may cause significant shifts in price competitiveness that need to be addressed by structural policies and/or countercyclical fiscal policy. Several euro area countries with legacy external imbalances have improved their price competitiveness in recent years when compared with the pre-pandemic period, while others have recorded considerable losses in price competitiveness.
- JEL Code:
- E31,F32,J31
- 29 June 2023
-
Economic Bulletin - BoxEconomic Bulletin Issue 4, 2023Details
- Abstract:
- This box describes liquidity conditions and the Eurosystem’s monetary policy operations during the first and second maintenance periods of 2023, from 8 February to 9 May 2023.
- JEL Code:
- E40,E52,E58
- 29 June 2023
-
Economic Bulletin - BoxHow have unit profits contributed to the recent strengthening of euro area domestic price pressures?Economic Bulletin Issue 4, 2023Details
- Abstract:
- This box looks at how unit profits have contributed to the recent strengthening of euro area domestic price pressures, using national accounts data up to the first quarter of 2023. It analyses the contribution made by unit profits using a broad profit indicator based on gross operating surplus and mixed income, as well as more narrowly defined profit indicators derived from the national accounts (which are closer to business profits). It also shows how the current signals from unit profits based on national accounts data correspond to those of indicators of mark-ups and profit margins derived from corporate accounts. This analysis shows that unit profits have grown strongly of late and made a visible contribution to domestic price pressures in the euro area. This is true for both the broad indicator of unit profits and more narrowly defined profit indicators. The box also shows that in an environment characterised by surging intermediate consumption costs, it is possible for unit profits to increase strongly and have an upward effect on inflation while mark-ups and profit margin indicators derived from corporate accounts remain broadly unchanged.
- JEL Code:
- E31
- 29 June 2023
-
Economic Bulletin - BoxEconomic Bulletin Issue 4, 2023Details
- Abstract:
- This box analyses sentiment indices of profits and investment that have been compiled from a new data source, namely earnings call transcripts of listed euro area firms. It shows that these data series have correlated well with standard investment and profit series over the past two decades. It also demonstrates that profit sentiment has improved since the third quarter of 2021, while corporate investment sentiment rose slightly further in the second quarter of 2023, despite tightening financing conditions. At the sectoral level, profit sentiment in the services and utilities sectors has held up better than it has in the manufacturing sector since last year. In addition, an indicator of financial risk extracted from the earnings call data shows that firms are highly concerned about rising financing costs and perceive tighter financing conditions as a clear risk.
- JEL Code:
- E22,E30,E32
- 29 June 2023
-
Economic Bulletin - BoxEconomic Bulletin Issue 4, 2023Details
- Abstract:
- Since the outbreak of the pandemic, households in the euro area and the United States have accumulated a remarkable stock of savings, which exceeds the pre-pandemic trend and provides a boost to private consumption. This box documents how, in the euro area, the stock of excess savings is mainly held in illiquid assets, which are not readily available for consumption. It also shows that, despite some differences in the euro area and the United States, excess savings are concentrated among wealthy individuals, who generally have a lower marginal propensity to consume. Using a calibrated general equilibrium model with heterogeneous agents, the box shows that the consumption impulse from the immediate use of such excess savings is dampened by the anticipation of a future expansion in demand, as households smooth their consumption patterns over time. Overall, the results suggest that the consumption impulse from excess savings accumulated during the pandemic has declined in both economies since the second half of 2021 and has been lower in the euro area compared with the United States.
- JEL Code:
- E21,E44,E52
- 28 June 2023
- 28 June 2023
-
Monetary developments in the euro areaAnnexes
- 28 June 2023
-
Monetary developments in the euro area
- 28 June 2023
-
The ECB BlogDetails
- JEL Code:
- E40,E42
- Subtitle:
- Contribution by Fabio Panetta, Member of the Executive Board of the ECB, and Valdis Dombrovskis, Executive Vice-President of the European Commission
- 27 June 2023
-
Weekly financial statementAnnexes
- 27 June 2023
-
Weekly financial statement - Commentary
- 27 June 2023
-
SpeechDetails
- Subtitle:
- Speech by Christine Lagarde, President of the ECB, at the ECB Forum on Central Banking 2023 on “Macroeconomic stabilisation in a volatile inflation environment” in Sintra, Portugal
- 26 June 2023
-
Economic Bulletin - ArticleEconomic Bulletin Issue 4, 2023Details
- Abstract:
- Since 2020 the euro area has been hit by a succession of extraordinary adverse shocks: the coronavirus (COVID-19) pandemic, global supply chain strains, Russia’s invasion of Ukraine and the related energy price hike. This article reviews the main developments in economic activity between the beginning of 2020 and the end of 2022. Empirical analysis shows that demand forces related to the reopening of the economy, the strong policy support over that period and, more recently, the absorption of the adverse shocks have contributed to the post-pandemic recovery.
- JEL Code:
- E31,E37,E62,E63
- 25 June 2023
-
InterviewDetails
- Subtitle:
- Interview with Luis de Guindos, Vice-President of the ECB, conducted by María Jesús Pérez, John Müller and Daniel Caballero
- 23 June 2023
- 23 June 2023
- 23 June 2023
- 23 June 2023
- 23 June 2023
- 23 June 2023
-
SpeechDetails
- Subtitle:
- Speech by Fabio Panetta, Member of the Executive Board of the ECB, at a panel on the future of crypto at the 22nd BIS Annual Conference, 23 June 2023
Annexes- 23 June 2023
-
Speech
- 23 June 2023
-
SpeechDetails
- Subtitle:
- Speech by Christine Lagarde, President of the ECB, at the Summit for a new global financing pact in Paris
- 22 June 2023
- 22 June 2023
-
SpeechDetails
- Subtitle:
- Keynote speech by Fabio Panetta, Member of the Executive Board of the ECB, at the Fifth Joint Deutsche Bundesbank, European Central Bank and Federal Reserve Bank of Chicago Conference on CCP Risk Management
- 22 June 2023
-
Research Bulletin - Issue No. 108Details
- Abstract:
- Are central bank tools effective in reaching non-banks with no access to the lender of last resort facilities? Using runs on mutual funds in March 2020 as a laboratory, we show that, following the announcement of large-scale asset purchases, funds with higher ex ante shares of assets eligible for central bank purchases saw their performance improve by 3.6 percentage points and outflows decrease by 61% relative to otherwise similar funds. Following central bank liquidity provision to banks, the growth rate of repo lending to funds by banks more exposed to the system-wide liquidity crisis was up to five times higher compared with other banks.
- JEL Code:
- E58,G01,G10,G21,G23
- 21 June 2023
-
Press releaseRelated
- 21 June 2023
-
The international role of the euro
- 21 June 2023
-
The international role of the euro - BoxThe international role of the euro 2023Details
- 21 June 2023
-
The international role of the euro - BoxThe international role of the euro 2023Details
- 21 June 2023
-
The international role of the euro - BoxThe international role of the euro 2023Details
- 21 June 2023
-
The international role of the euro - BoxThe international role of the euro 2023Details
- 21 June 2023
-
The international role of the euro - BoxThe international role of the euro 2023Details
- 21 June 2023
-
The international role of the euro - Special featureThe international role of the euro 2023Details
- 21 June 2023
-
The international role of the euro - Special featureThe international role of the euro 2023Details
- 21 June 2023
-
The international role of the euro - Special featureThe international role of the euro 2023Details
- 21 June 2023
-
The international role of the euroAnnexes
- 21 June 2023
-
The international role of the euro - Statistical annex
Related- 21 June 2023
-
Press release
- 21 June 2023
-
The ECB BlogDetails
- JEL Code:
- O31,O33,O47
- Subtitle:
- Digitalisation has boosted some European firms’ productivity, but many are still on the digital sidelines. That is a pity as faster digital adoption could make our economies much more productive. This ECB Blog post looks at where and how digitalisation can be a gamechanger.
- 20 June 2023
-
Occasional Paper Series - Issue No. 318Details
- Abstract:
- Central banks around the world are increasingly monitoring climate change risks and how these affect their balance sheets and their monetary policy transmission. The European Central Bank (ECB) extensively reviewed its monetary policy implementation framework in 2020-21 to better account also for climate change risks. This paper describes these considerations in detail to provide a holistic perspective of one central bank’s climate-related work in relation to its monetary policy implementation framework. The paper starts by characterising the strategic reflections behind the principles of the enhanced framework and their relationship with the ECB monetary policy strategy review. Climate-related disclosures, improvements in risk assessment, a strengthened collateral framework and tilting of corporate bond purchases are the main pillars of the framework enhancements. The paper sheds light on the key motivations behind these enhancements, including the aspects that were reviewed but left unchanged. It also takes stock of the different challenges involved in the identification and estimation of climate change-related risk, how these can be partially overcome, and when they cannot be overcome, how they can constrain the ability of financial institutions, including central banks, to take further action. The integration of climate change considerations into the monetary policy implementation framework is at its inception. As data availability and quality improve, and risk methodologies develop, central banks will be able to deepen their approach. This paper also examines possible future avenues that central banks, including the ECB, might take to further refine their monetary policy implementation using an assessment framework for climate change-related adjustments.
- JEL Code:
- E52,E58,Q54,D53
- 20 June 2023
-
SpeechDetails
- Subtitle:
- Speech by Luis de Guindos, Vice-President of the ECB, at the ceremony to award the 21st Germán Bernácer Prize for Promoting Economic Research in Europe to Matteo Maggiori
- 20 June 2023
-
Weekly financial statementAnnexes
- 20 June 2023
-
Weekly financial statement - Commentary
- 20 June 2023
-
Balance of payments (monthly)
- 19 June 2023
-
Statistics Paper Series - Issue No. 44Details
- Abstract:
- This paper contributes to the ongoing efforts by the European authorities to reduce the reporting burden for banks by assessing the statistical methods currently used to compile data on financial transactions related to securities holdings. Based on statistical information collected from the Banca d’Italia, we compare data on purchases of securities net of sales and redemptions reported by banks with transaction estimates based on indirect (balance sheet) methods that are permitted within the methodological framework of datasets compiled by the European System of Central Banks (ESCB). Although the direct method of collecting data on transactions is more costly for reporting agents, it produces results which are fully aligned with current statistical methodological standards (European System of Accounts 2010, ESA 2010). By contrast, the indirect method is a simplified and less costly approach. The recent development of high-quality data sources such as the ESCB integrated system for the market prices of securities – the Centralised Securities Database – has boosted the attractiveness of indirect methods since they have the potential to deliver accurate and reliable estimates. The significance of the differences between direct collection and indirect compilation of these data is analysed in detail for listed ISIN securities that are actively traded on exchanges, by also considering the impact of price volatility and trading activity. From an aggregated perspective, all indirect methods produce results which are comparable and consistent with the ESA 2010 methodology for all instrument types. There are some minor differences for equity instruments, due to the higher price volatility and trading activity associated with these instruments, but the overall aggregated dynamics are also well captured by indirect methods in these cases. [...]
- JEL Code:
- C18,C81,G15
- 19 June 2023
-
SpeechDetails
- Subtitle:
- Speech by Isabel Schnabel, Member of the Executive Board of the ECB, at the Euro50 Group conference on “New challenges for the Economic and Monetary Union in the post-crisis environment”
Annexes- 19 June 2023
-
Speech
- 19 June 2023
-
SpeechDetails
- Subtitle:
- Background slides by Philip R. Lane, Member of the Executive Board of the ECB, for dialogue with Matteo Maggiori on the occasion of the award of the Germán Bernácer Prize
- 19 June 2023
-
Euro area pension fund statisticsAnnexes
- 19 June 2023
-
Euro area pension fund statistics
- 19 June 2023
-
Survey of Monetary Analysts - Aggregate results
- 16 June 2023
-
SpeechDetails
- Subtitle:
- Remarks by Christine Lagarde, President of the ECB, at the G30 dinner in Amsterdam
- 16 June 2023
-
Governing Council decisions - Other decisions
- 16 June 2023
-
Working Paper Series - Issue No. 2826Details
- Abstract:
- We document the structure of firm-bank relationships for the eleven largest euro area countries and present new stylized facts using data from the Eurosystem credit registry - AnaCredit. We look at the number of banking relationships, reliance on the main bank, credit instruments, loan maturity, and interest rates. Firms in Southern Europe borrow from more banks and obtain a lower share of credit from the main bank than those in Northern Europe. They also tend to borrow more on short-term, more expensive instruments and to obtain loans with shorter maturity. This is consistent with the hypothesis that firms in Southern Europe rely less on relationship banking and obtain credit less conducive to firm growth, in line with their smaller average size. Relationship lending does not translate into lower rates, possibly because banks appropriate part of the surplus generated by relationship lending through higher rates. Finally, assortative matching, according to which small banks specialize in supplying credit to small firms, is stronger in Northern European countries.
- JEL Code:
- G21,G3,G32
- 16 June 2023
-
TARGET Annual Report - Issue No. 2022
- 15 June 2023
-
Statistics Paper Series - Issue No. 43Details
- Abstract:
- In early 2020, the rapid spread of the coronavirus (COVID-19) quickly developed into a pandemic. This was followed by a sharp global economic downturn that was extraordinary in its speed, reach and scale. Within days of the first reported COVID-19 cases, the ECB daily Composite Indicator of Systemic Stress soared, and stress in several financial market segments began to flare up. These rapidly emerging financial strains could not be captured by a composite indicator of financial integration at the time because such indicators were low-frequency – principally monthly or even quarterly. The first aim of this paper is to present the steps taken in constructing a novel high-frequency price-based indicator of financial integration (HF-PIFI). Throughout the COVID-19 crisis, this novel indicator was responsive to public health data releases, incoming economic and financial data, and policy announcements. In this sense, it acted as a “thermometer”. The second aim of the paper is to use the novel indicator to identify events that were either supportive or damaging with respect to financial integration. This helps to distinguish between the main phases of the pandemic. The third aim of the paper is to review how the novel HF-PIFI indicator performed against the low-frequency indicators of financial integration. Looking back, the signals from the HF-PIFI index were quite accurate: the benefits of daily signals based on market data outweigh those of relying on a more limited set of low-frequency data.
- JEL Code:
- C82,C83,E58,G10
- 15 June 2023
-
PodcastRelated
- 15 June 2023
-
Monetary policy statement
- 15 June 2023
-
Macroeconomic projections for the euro areaAnnexes
- 15 June 2023
- 29 June 2023
- 15 June 2023
-
Combined monetary policy decisions and statementRelated
- 15 June 2023
-
Monetary policy statement
- 15 June 2023
-
Monetary policy decision
- 15 June 2023
-
Monetary policy statementDetails
- Subtitle:
- Christine Lagarde, President of the ECB, Luis de Guindos, Vice-President of the ECB, Frankfurt am Main, 15 June 2023
Related- 15 June 2023
-
Combined monetary policy decisions and statement
- 15 June 2023
- 15 June 2023
-
Monetary policy decisionRelated
- 15 June 2023
-
Combined monetary policy decisions and statement
- 13 July 2023
-
Monetary policy account
- 13 June 2023
-
Weekly financial statementAnnexes
- 13 June 2023
-
Weekly financial statement - Commentary
- 13 June 2023
-
Digital Euro Investigation Phase - Scheme Rulebook Development Group documents
- 13 June 2023
-
Digital Euro Investigation Phase - Scheme Rulebook Development Group documents
- 9 June 2023
-
SpeechDetails
- Subtitle:
- Contribution by Luis de Guindos, Vice-President of the ECB, at Seminar on the Capital Requirements Regulation and Directive (CRR/CRD)
- 8 June 2023
-
The ECB BlogDetails
- JEL Code:
- Q50,Q20,G28
- Subtitle:
- Humanity needs nature to survive, and so do the economy and banks. The more species become extinct, the less diverse are the ecosystems on which we rely. This presents a growing financial risk that cannot be ignored, warns Frank Elderson, member of the Executive Board of the ECB and Vice-Chair of the Supervisory Board of the ECB.
- 8 June 2023
-
InterviewDetails
- Subtitle:
- Interview with Frank Elderson, Member of the Executive Board of the ECB and Vice-Chair of the Supervisory Board of the ECB, conducted by Martin Arnold on 1 June 2023
- 7 June 2023
- 7 June 2023
-
The ECB BlogDetails
- JEL Code:
- E24,E31
- Subtitle:
- Unemployment has declined since the peak of the pandemic in August 2020, hitting a record low this April. But while more people have jobs, they are working fewer hours on average. In this post for The ECB Blog we shed light on this dichotomy and why it matters for the overall strength of the labour market.
- 7 June 2023
-
Digital Euro Investigation Phase - Scheme Rulebook Development Group documents
- 7 June 2023
-
SpeechDetails
- Subtitle:
- Keynote speech by Luis de Guindos, Vice-President of the ECB, at the Annual Joint Conference of the European Commission and the European Central Bank on European Financial Integration
- 7 June 2023
-
Press releaseRelated
- 7 June 2023
-
Survey on the Access to Finance of Enterprises in the euro area
- 7 June 2023
-
Survey on the Access to Finance of Enterprises in the euro areaAnnexes
- 7 June 2023
-
SAFE questionnaire
Related - 7 June 2023
-
InterviewDetails
- Subtitle:
- Interview with Isabel Schnabel, Member of the Executive Board of the ECB, conducted by Wouter Vervenne and Kris van Hamme on 31 May 2023
- 6 June 2023
-
Disaggregated financial statement
- 6 June 2023
-
Weekly financial statementAnnexes
- 6 June 2023
-
Weekly financial statement - Commentary
- 6 June 2023
-
Working Paper Series - Issue No. 2825Details
- Abstract:
- Using a sample of open-end corporate bond funds domiciled in the euro area, we exploit the COVID-19 market turmoil in March 2020 to examine two channels through which liquidity buffers can reduce procyclicality in the investment fund sector. First, we find that liquidity buffers reduced outflows during March 2020 only to a limited extent. Second, we find that funds entering the crisis with higher liquidity buffers were less likely to involve in cash hoarding and more likely to use cash buffers to meet outflows. Our results suggest that higher liquidity buffers can reduce procyclicality primarily through supporting the liquidity management strategies employed by fund managers.
- JEL Code:
- G01,G11,G23
- 6 June 2023
-
T2S Annual Report - Issue No. 2022
- 6 June 2023
-
Press release
- 6 June 2023
-
Consumer Expectation Survey
- 6 June 2023
-
Consumer Expectation Survey
- 6 June 2023
-
Consumer Expectation Survey
- 6 June 2023
-
Consumer Expectation Survey
- 5 June 2023
-
SpeechDetails
- Subtitle:
- Speech by Christine Lagarde, President of the ECB, at the Hearing of the Committee on Economic and Monetary Affairs of the European Parliament
Annexes- 5 June 2023
- 5 June 2023
-
Speech
- 5 June 2023
- 5 June 2023
-
Working Paper Series - Issue No. 2824Details
- Abstract:
- While it has become clear that communication is a monetary policy tool for central banks, and extensive research has been conducted on central bank communication with financial markets, little is known so far on central bank communication with the general public. My research provides new insights into this field, confirming that the efforts of central banks to connect with a wider public are not in vain. In a randomised controlled trial, I focus on the determinants of trust in the European Central Bank (ECB) and on understanding of its communication about the Pandemic Emergency Purchase Programme, which was set up as part of the ECB’s response to the COVID-19 crisis. I find that the ECB’s simplified and relatable communication leads to greater trust in the central bank among the general public, as it has a positive impact on perceptions of the ECB among laypeople. The simplified content also proves to contribute to increased understanding of the central bank’s messages among the wider public.
- JEL Code:
- C83,C93,D83,E52,E58
- 5 June 2023
-
Working Paper Series - Issue No. 2823Details
- Abstract:
- Our paper uses credit registry data for the euro area to examine how the banking system transmits asset price shocks to credit via revaluation of collateral and subsequent lending decisions. Specifically we examine banks’ treatment of real estate collateral during the Covid-19 crisis. First we find evidence of significant frictions in the trans-mission of asset price dynamics to collateral values. Despite this we find that lending relationships reliant on real estate collateral received one third less credit following the outbreak of the pandemic and that firms experiencing downward revaluations of their collateral were significantly less likely to be given new loans. Our findings confirm that the collateral channel does create an economically significant link between real estate values and credit but suggest that the banking system’s role in transmission may be more complex than traditional economic theory would imply.
- JEL Code:
- G21,R3,C55
- 5 June 2023
-
MFI interest rate statistics
- 2 June 2023
-
Euro area insurance corporations statisticsAnnexes
- 2 June 2023
-
Euro area insurance corporations statistics
- 2 June 2023
-
InterviewDetails
- Subtitle:
- Interview with Fabio Panetta, Member of the Executive Board of the ECB, conducted by Eric Albert
- 1 June 2023
-
SpeechDetails
- Subtitle:
- Welcome address by Luis de Guindos, Vice-President of the ECB, at the meeting of the Council of Presidents of BusinessEurope
Related- 31 May 2023
-
Financial Stability Review
- 1 June 2023
-
Press release
- 1 June 2023
-
Monetary policy accountRelated
- 4 May 2023
-
Monetary policy decision
- 1 June 2023
-
SpeechDetails
- Subtitle:
- Speech by Christine Lagarde, President of the ECB, at “Deutscher Sparkassentag 2023”, Hanover
- 1 June 2023
-
The ECB BlogDetails
- JEL Code:
- Q54
- Subtitle:
- Can EU companies be both green and globally competitive? Tradeable allowances for carbon emissions set important price incentives for companies to become greener. Unfortunately, evidence shows that many companies move carbon intensive production to other regions, meaning their emissions leak abroad. This ECB Blog post investigates how the EU can strike a balance between green goals and competitiveness.
- 31 May 2023
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Press releaseRelated
- 31 May 2023
-
Financial Stability Review
- 31 May 2023
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Financial Stability Review - ArticleFinancial Stability Review Issue 1, 2023Details
- Abstract:
- Climate change can have a negative effect on sovereign balance sheets directly (when contingent liabilities materialise) and indirectly (when it has an impact on the real economy and the financial system). This special feature highlights the contingent sovereign risks that stem from an untimely or disorderly transition to a net-zero economy and from more frequent and severe natural catastrophes. It also looks at the positive role that governments can play in reducing climate-related financial risks and incentivising adaptation. If the recent trend of ever-lower emissions across the EU is to be sustained, further public sector investment is essential. In this context, the progress made to strengthen green capital markets has fostered government issuance of green and sustainable bonds to finance the transition. While putting significant resources into adaptation projects can increase countries’ resilience to climate change, the economic costs of extreme climate-related events are still set to rise materially in the EU. Only a quarter of disaster losses are currently insured and fiscal support has mitigated related macroeconomic and financial stability risks in the past. Looking ahead, vulnerabilities arising from contingent liabilities may increase in countries with high physical risk and a large insurance protection gap. If these risks rise alongside sovereign debt sustainability concerns, the impact on financial stability could be amplified by feedback loops that see sovereign credit conditions and ratings deteriorate.
- JEL Code:
- G10,G18,G20,G32,Q51,Q54,Q58
- 31 May 2023
-
Financial Stability ReviewAnnexes
- 31 May 2023
-
Financial Stability Review
Related- 31 May 2023
- 1 June 2023
- 30 May 2023
-
Weekly financial statementAnnexes
- 30 May 2023
-
Weekly financial statement - Commentary
- 30 May 2023
-
Monetary developments in the euro areaAnnexes
- 30 May 2023
-
Monetary developments in the euro area
- 30 May 2023
-
Financial Stability Review - ArticleFinancial Stability Review Issue 1, 2023Details
- Abstract:
- Banks are connected to non-bank financial intermediation (NBFI) sector entities via loans, securities and derivatives exposures, as well as funding dependencies. Linkages with the NBFI sector expose banks to liquidity, market and credit risks. Funding from NBFI entities would appear to be the most likely and strongest spillover channel, considering that NBFI entities maintain their liquidity buffers primarily as deposits and very short-term repo transactions with banks. At the same time, direct credit exposures are smaller and are often related to NBFI entities associated with banking groups. Links with NBFI entities are highly concentrated in a small group of systemically important banks, whose sizeable capital and liquidity buffers are essential to mitigate spillover risks.
- JEL Code:
- G21,G22,G23
- 30 May 2023
-
Survey of Monetary Analysts
- 30 May 2023
-
Financial Stability Review - ArticleFinancial Stability Review Issue 1, 2023Details
- Abstract:
- The ability of market participants to access funding and conduct transactions in an efficient way is a prerequisite for financial stability, providing shock-absorption capacity and, in turn, limiting the scope for shock amplification. Market liquidity and funding liquidity are inherently connected. When market liquidity evaporates, financial market pricing becomes less reliable and tends to overreact, leading to increased market volatility and higher funding costs. Funding liquidity enables market participants to take exposures onto their balance sheets, thus absorbing fluctuations in demand and supply in the name of efficient market functioning. Under extreme conditions, markets can stop functioning altogether. While liquidity has many dimensions, from a systemic perspective the interplay between market liquidity and funding liquidity is key, as these two dimensions can reinforce each other in ways that generate liquidity spirals. Cyclical factors such as the business cycle, systemic leverage and monetary and fiscal policy affect the probability of liquidity stress arising. In the light of the current challenges of high financial market volatility, increased risk of recession, bouts of heightened risk aversion and monetary policy normalisation, this special feature constructs composite indicators for market liquidity and funding liquidity. It attempts also to identify the causes of poor market and funding liquidity conditions and to show how the two dimensions interact in the euro area.
- JEL Code:
- E52,E58,G15,G21
- 26 May 2023
- 26 May 2023
-
Other publicationAnnexes
- 26 May 2023
-
Press release
- 26 May 2023
-
Governing Council decisions - Other decisions
- 26 May 2023
-
Press releaseRelated
- 26 May 2023
-
Card fraud report
- 26 May 2023
-
Card fraud reportRelated
- 26 May 2023
-
Press release
- 26 May 2023
-
SpeechDetails
- Subtitle:
- Panel discussion by Philip R. Lane, Member of the Executive Board of the ECB, at the 29th Dubrovnik Economic Conference
- 26 May 2023
-
Research Bulletin - Issue No. 107Details
- Abstract:
- At the onset of the outbreak of the coronavirus (COVID-19) pandemic, central banks and supervisors introduced dividend restrictions as a new policy instrument aimed at supporting lending to the real economy and strengthening banks' capacity to absorb losses. In this paper we estimate the impact of the ECB's dividend recommendationon on bank lending and risk-taking. To address identification issues, we rely on credit registry data and a direct measure that captures variation in compliance with the recommendation across banks in the euro area. The analysis disentangles the confounding effects stemming from the wide range of monetary and fiscal policies that supported credit during the pandemic-related downturn and investigates their interaction with the dividend recommendation. We find that dividend restrictions have been an effective policy in supporting financially constrained firms, adding capital space to banks, and limiting procyclical behaviour. The effects on lending are greater for small and medium-sized enterprises and for firms operating in sectors more vulnerable to the effects of the pandemic. At the same time, we do not find evidence of a significant increase in lending to riskier borrowers and "zombie" firms.
- JEL Code:
- E5,E51,G18,G21
- 25 May 2023
-
SpeechDetails
- Subtitle:
- Introductory remarks by Luis de Guindos, Vice-President of the ECB, at the ECON Committee of the European Parliament
Related- 25 May 2023
-
Annual Report
- 25 May 2023
- 25 May 2023
-
Other publicationRelated
- 25 May 2023
-
Annual Report
- 25 May 2023
- 25 May 2023
-
The ECB BlogDetails
- JEL Code:
- Q54
- Subtitle:
- Carbon pricing is a central instrument in the EU’s fight against climate change, but it will also affect our economies. In this post on The ECB Blog, we use macroeconomic models to look at what higher prices for carbon emissions will do to growth and inflation.
- 25 May 2023
-
Feedback on the input provided by the European Parliament as part of its resolution on the ECB’s Annual ReportRelated
- 25 May 2023
-
Annual Report
- 25 May 2023
-
Other publication
- 25 May 2023
- 25 May 2023
-
Annual ReportRelated
- 25 May 2023
- 23 February 2023
-
Annual Accounts
- 25 May 2023
-
Other publication
- 25 May 2023
- 24 May 2023
-
SpeechDetails
- Subtitle:
- Opening remarks by Christine Lagarde, President of the ECB, at the celebration to mark the 25th anniversary of the ECB
- 24 May 2023
-
Working Paper Series - Issue No. 2822Details
- Abstract:
- This paper empirically investigates the effect of the EU-South Korea free trade agreement (FTA) on manufacturing trade flows. By applying a state-of-the-art structural gravity model with intranational (i.e., domestic) trade and using disaggregated data, we quantify both the trade impact and the observed heterogeneity in the FTA estimates. In line with literature, we find that the FTA exerted asymmetric effects in bilateral exports across directions of trade. Compared to previous studies, our findings suggest a different explanation for the poor performances of Korean exports to the EU in the post-FTA period, namely offshoring patterns in electronics and a broad-based decline in the shipbuilding industry. When we drop these two export categories from the analysis, we show that the FTA exerted a large effect on trade in both directions, increasing bilateral exports by about 30 percent. We then investigate heterogeneity in pair-industry-specific estimates of the FTA. The main source of variation is represented by asymmetries in ex ante trade barriers across sectors, with a prominent role for non-tariff instruments. Stronger pre-FTA regulatory intensity is associated to a high liberalization potential, favouring larger FTA estimates.
- JEL Code:
- F10,F13,F14
- 24 May 2023
-
Euro area investment fund statisticsAnnexes
- 24 May 2023
-
Euro area investment fund statistics
- 24 May 2023
-
Euro area financial vehicle corporation statisticsAnnexes
- 23 May 2023
-
Euro area financial vehicle corporation statistics
- 24 May 2023
-
The ECB BlogDetails
- Subtitle:
- The euro is more than a currency, says President Christine Lagarde. It is the strongest form of European integration and stands for a united Europe that works together, protecting and benefiting all its citizens. The ECB, with its commitment to price stability, will always be a cornerstone of that effort.
- 24 May 2023
-
InterviewDetails
- Subtitle:
- Interview with Fabio Panetta, Member of the Executive Board of the ECB, conducted by Karl de Meyer
- 23 May 2023
-
Weekly financial statementAnnexes
- 23 May 2023
-
Weekly financial statement - Commentary
- 23 May 2023
-
Working Paper Series - Issue No. 2821Details
- Abstract:
- Understanding of the macroeconomic effects of climate change is developing rapidly, but the implications for past and future inflation remain less well understood. Here we exploit a global dataset of monthly consumer price indices to identify the causal impacts of changes in climate on inflation, and to assess their implications under future warming. Flexibly accounting for heterogenous impacts across seasons and baseline climatic and socio-economic conditions, we find that increased average temperatures cause non-linear upwards inflationary pressures which persist over 12 months in both higher- and lower-income countries. Projections from state-of-the-art climate models show that in the absence of historically un-precedented adaptation, future warming will cause global increases in annual food and headline inflation of 0.92-3.23 and 0.32-1.18 percentage-points per year respectively, under 2035 projected climate (uncertainty range across emission scenarios, climate models and empirical specifications), as well as altering the seasonal dynamics of inflation. Moreover, we estimate that the 2022 summer heat extreme increased food inflation in Europe by 0.67 (0.43-0.93) percentage-points and that future warming projected for 2035 would amplify the impacts of such extremes by 50%. These results suggest that climate change poses risks to price stability by having an upward impact on inflation, altering its seasonality and amplifying the impacts caused by extremes.
- JEL Code:
- Q54,E31,C33
- 23 May 2023
-
Working Paper Series - Issue No. 2820Details
- Abstract:
- This paper analyses the impact of changes in environmental regulations on productivity growth at country- and firm-level. We exploit several data sources and the environmen-tal policy stringency index, to evaluate the Porter hypothesis, according to which firms’ productivity can benefit from more stringent environmental policies. By using panel local projections, we estimate the regulatory impact over a five-year horizon. The identification of causal impacts of regulatory changes is achieved by the estimation of firms’ CO2 emissions via a machine learning algorithm. At country- and firm-level, policy tightening affects high-polluters’ productivity negatively and stronger than their less-polluting peers. However, among high-polluting firms, large ones experience positive total factor productivity growth due to easier access to finance and greater innovativeness. Hence, we do not find support for the Porter hypothesis in general. However for technology support policies and firms with the required resources, policy tightening can enhance productivity.
- JEL Code:
- O44,Q52,Q58
- 23 May 2023
-
Balance of payments (monthly)
- 23 May 2023
-
SpeechDetails
- Subtitle:
- Speech by Luis de Guindos, Vice-President of the ECB, at the Association for Financial Markets in Europe (AFME) and Official Monetary and Financial Institutions Forum (OMFIF) 3rd Annual European Financial Integration Conference
- 19 May 2023
-
SpeechDetails
- Subtitle:
- Speech by Isabel Schnabel, Member of the Executive Board of the ECB, at the Conference on Financial Stability and Monetary Policy in the honour of Charles Goodhart
Annexes- 19 May 2023
-
Speech
- 19 May 2023
-
The ECB BlogDetails
- JEL Code:
- E44
- Subtitle:
- At times, media reports on ECB monetary policy refer to information from unidentified Eurosystem sources. This ECB Blog post takes a closer look at such leaks. They tend to go against prevailing trends in short-term rates and can trigger major market reactions even though they are not generally informative about upcoming decisions.
- 19 May 2023
-
Economic Bulletin
- 19 May 2023
-
Economic Bulletin - BoxEconomic Bulletin Issue 3, 2023Details
- Abstract:
- The euro area’s population is projected to continue ageing and to shrink significantly over the coming generations. The coronavirus (COVID-19) pandemic and the influx of migrants are leaving a mark on the short and medium-term demographic outlook for the euro area compared with the 2019 population projections. This box shows that the resulting demographic outlook is expected to have some positive impact on the growth outlook and to ease the cost-of-ageing pressures on public finances. Overall, however, demographic trends continue to pose significant challenges to the euro area economy, and these challenges should be addressed in a timely manner.
- JEL Code:
- R23,E24,H50
- 19 May 2023
-
Economic Bulletin - BoxEconomic Bulletin Issue 3, 2023Details
- Abstract:
- On 22 February 2023 Eurostat released data on government expenditure for the year 2021 according to the Classification of the Functions of Government (COFOG). These data provide information on the functional composition of government spending in countries across the euro area. The ratio of euro area public expenditure to GDP has increased substantially over recent years, from 46.9% in 2019 to 52.6% in 2021. This increase in spending was primarily in the categories of economic affairs, social protection and health, and reflects the introduction of government measures to mitigate the effects of the COVID-19 pandemic on the economy.
- JEL Code:
- E62,H11,H20,H23,H50
- 19 May 2023
-
Economic Bulletin - BoxEconomic Bulletin Issue 3, 2023Details
- Abstract:
- The increase in consumer goods price inflation in the euro area over the last two years was preceded by a sharp rise in producer prices. Producer price indices (PPIs) capture the prices of goods at the time when these goods leave factory gates. Simple correlation analysis suggests that the strength of the link between producer and consumer price indices can vary over time. Indicators of producer price pressures on consumer price inflation (IPPIs) are constructed using dynamic impulse responses of consumer prices to changes in producer prices (elasticities), obtained with the local projections (LP) estimation method. The IPPIs based on these elasticities and actual PPI data suggest a significant increase in underlying cost pressures over the course of 2022. The level of these pressures remained high for both non-food consumer goods and food products in early 2023. Overall, IPPIs can help to assess the strength and direction of the underlying pressures on NEIG and food prices, but they remain subject to several caveats.
- JEL Code:
- E31,E37
- 19 May 2023
-
Economic Bulletin - BoxEconomic Bulletin Issue 3, 2023Details
- Abstract:
- This box provides empirical evidence on the role of the recent energy price shock in affecting price competitiveness and euro area export performance. At the aggregate level, an analysis based on a structural vector autoregression (SVAR) shows that the chief drivers of export dynamics in the past two years have been shifts in global demand conditions and the effects of supply bottlenecks. The energy supply shock has played a relatively minor role in dampening overall export growth, lowering it by about one percentage point on average over the past year. However, the energy shock may have played a greater role in more exposed sectors, as euro area exports have decreased strongly in high energy-intensive sectors over the past year. Indicators based on relative prices point to a loss of competitiveness for the euro area during 2022. The medium-term outlook for euro area competitiveness may deteriorate further on account of structural changes in energy costs because of the diversification of gas sources and the energy transition, which may lead to higher input costs for euro area exporters compared with their foreign competitors.
- JEL Code:
- F1
- 19 May 2023
-
Economic Bulletin - BoxEconomic Bulletin Issue 3, 2023Details
- Abstract:
- Large-scale transfers of intellectual property products (IPP) conducted by multinational enterprises in Ireland are increasingly affecting euro area output, investment and trade measures. At the time of transfer, the within-quarter impact of these inflows tends to be neutral for euro area real GDP growth, as IPP transfers are often accompanied by services imports of equal size. However, in subsequent quarters these inflows typically have a positive effect on euro area GDP growth, as they boost both the capital stock and future export streams.
- JEL Code:
- E01,E22,F23,F43,F62
- 17 May 2023
-
SpeechDetails
- Subtitle:
- Remarks by Luis de Guindos, Vice-President of the ECB, at the 18th edition of the Banking Sector Industry Meeting “Banking: Navigating the Wave of Inflation”
- 17 May 2023
-
SpeechDetails
- Subtitle:
- Presentation by Fabio Panetta, Member of the Executive Board of the ECB, at Kangaroo Group virtual debate
- 17 May 2023
-
Working Paper Series - Issue No. 2819Details
- Abstract:
- We use scenario analysis to assess the macroeconomic effects of carbon transition policies aimed at mitigating climate change. To this end, we employ a version of the ECB’s New Area-Wide Model (NAWM) augmented with a framework of disaggregated energy production and use, which distinguishes between “dirty” and “clean” energy. Our central transition scenario is that of a permanent increase in carbon taxes, which are levied as a surcharge on the price of dirty energy. Our findings suggest that increasing euro area carbon taxes to an interim target level consistent with the transition to a net-zero economy entails a transitory rise in inflation and a lasting, albeit moderate decline in GDP. We show that the short and medium-term effects depend on the monetary policy reaction, on the path of the carbon tax increase and on its credibility, while expanding clean energy supply is key for containing the decline in GDP. Undesirable distributional effects can be addressed by redistributing the fiscal revenues from the carbon tax increase to low-income households.
- JEL Code:
- C54,E52,E62,H23,Q43
- 17 May 2023
-
Press release
- 17 May 2023
-
Economic Bulletin - BoxEconomic Bulletin Issue 3, 2023Details
- Abstract:
- This box analyses the dynamics of housing investment in the euro area and the United States and discusses the impact of the recent monetary policy tightening on future housing investment in the euro area. Building on the literature, the box argues that deeper mortgage markets, as reflected in higher levels of household mortgage indebtedness, securitisation and leverage, strengthen the transmission of monetary policy shocks to housing investment. In the euro area, where the mortgage markets are less deep, housing investment is found to react relatively less to monetary policy shocks than in the United States. As a result, housing investment in the euro area has been recently more sheltered from monetary policy tightening than housing investment in the United States. Despite this relative resilience of housing investment in the euro area, the box argues that most of the impact of tighter monetary policy in the euro area is still to materialise, thus clouding the outlook for housing investment.
- JEL Code:
- E22,E44,E52
- 16 May 2023
-
SpeechDetails
- Subtitle:
- Laudatory speech by Christine Lagarde, President of the ECB, for Angela Merkel at the award ceremony for the North Rhine-Westphalia State Prize on 16 May 2023
- 16 May 2023
-
Weekly financial statementAnnexes
- 16 May 2023
-
Weekly financial statement - Commentary
- 16 May 2023
-
Working Paper Series - Issue No. 2818Details
- Abstract:
- Can banks trade credit default swaps (CDSs) referenced on their current corporate clients at competitive prices, or are banks penalized for potentially holding private information? To answer this question we merge CDS trades reported under the European Market Infrastructure Regulation (EMIR) with syndicated loans from DealScan, and compare the prices on similar CDSs that the same dealer offers to banks and to other investors. We find that banks lending to a corporation purchase CDSs on this corporation at lower prices, and that, after trading with banks, dealers can earn higher margins on these CDSs when trading with other investors. Our findings suggest that banks hold valuable private information which is shared in their trades with dealers. Dealers then disseminate this information to financial markets.
- JEL Code:
- G14,G21,G23
- 16 May 2023
-
Working Paper Series - Issue No. 2817Details
- Abstract:
- Probabilistic job loss expectations elicited in the Consumer Expectations Survey have predictive power for future job loss. We find that an unexpected job loss leads to a negative consumption response, while this e˙ect is muted for workers with ex-ante job loss expectations - consistent with the Permanent Income Hypothesis. The negative consumption response to an unexpected job loss is stronger for workers who have worse perceptions of the local labour market, are older or have lower levels of liquid wealth. This supports the notion that the persistence of the unemployment shock is an important factor of the consumption response to a job loss. At the same time, we do not find a positive consumption response of workers who unexpectedly retain their job. These heterogeneous results have important implications for the expected impact on consumption of job protection measures such as job retention schemes.
- JEL Code:
- D12,D84,J63
- 16 May 2023
-
Economic Bulletin - ArticleEconomic Bulletin Issue 3, 2023Details
- Abstract:
- This article presents evidence on the distributional effects of the recent surge in inflation on households. Households experience inflation differently depending on their spending allocation. When the prices of essential goods rise, low-income households are particularly affected. Households also have different exposures to inflationary shocks depending on the income they allocate to consumption, their income risk and the composition of their wealth. In the current inflationary episode, the resilience of the labour market and the provision of fiscal support have so far tempered some of the adverse distributional consequences of high inflation on social welfare.
- JEL Code:
- E01,E21,E31,E64,F41
- 15 May 2023
-
Economic Bulletin - ArticleEconomic Bulletin Issue 3, 2023Details
- Abstract:
- This article reviews the impact of Brexit on recent developments in UK trade and labour markets. While it will take some time for the full impact of Brexit to emerge and the coronavirus (COVID-19) pandemic is a confounding factor, the available data allow a first stocktake of the effects of Brexit. While significant uncertainties regarding the precise magnitudes remain, the available evidence suggests that Brexit has been a drag on UK trade and has contributed to a fall in labour supply.
- JEL Code:
- F1,E24
- 15 May 2023
-
Euro area quarterly financial accounts - Quality reportAnnexes
- 15 May 2023
-
Euro area quarterly financial accounts - Quality report
- 15 May 2023
-
Economic Bulletin - BoxEconomic Bulletin Issue 3, 2023Details
- Abstract:
- This box analyses the macroeconomic implications of monetary policy tightening so far, drawing on a suite of models employed at the ECB.
- JEL Code:
- C32,E52,E58
- 14 May 2023
-
InterviewDetails
- Subtitle:
- Interview with Luis de Guindos, Vice-President of the ECB, conducted by Isabella Bufacchi
- 11 May 2023
-
Working Paper Series - Issue No. 2816Details
- Abstract:
- I study the causal effect of bond investor demand on the financing and investment decisions of nonfinancial firms using granular data on the bond transactions of U.S. insurance companies. Liquidity inflows from insurance premiums combined with insurers’ persistent investment preferences identify bond demand shifts, which raise bond prices and reduce firms’ financing costs. In response, firms issue more bonds, especially when they have well-connected bond underwriters. The proceeds are used for investment rather than shareholder payouts, particularly by financially constrained firms. The results emphasize that bond investors significantly affect corporate financing and investment decisions through their price impact.
- JEL Code:
- G12,G22,G23,G3,G32
- 11 May 2023
-
Working Paper Series - Issue No. 2815Details
- Abstract:
- Euro area labour market variables are published with a considerable lag, longer than in the case of real GDP. We develop a suite of models to provide a more timely estimate (nowcast) of euro area quarterly employment growth based on a broad range of monthly indicators. The suite includes a batch of different dynamic factor model and bridge equation specifications. We evaluate it in real time over 2013-2022 and find that (i) monthly indicators provide useful information for a timely assessment of employment developments with unemployment rates and sentiment indicators containing most of the relevant information, (ii) the performance of small-scale models is comparable to those based on a larger information set, (iii) the suite performs favourably compared to the Eurosystem/ECB staff macroeconomic projections,(iv) forecasting performance deteriorates temporarily at the initial stage of the COVID-19 pandemic period, but the models outperform the benchmarks again thereafter.
- JEL Code:
- C53,E24,E32,E37
- 11 May 2023
-
Press release
- 11 May 2023
-
Consumer Expectation Survey
- 11 May 2023
-
Consumer Expectation Survey
- 11 May 2023
-
Consumer Expectation Survey
- 11 May 2023
-
Consumer Expectation Survey
- 11 May 2023
-
Digital Euro Investigation Phase - Scheme Rulebook Development Group documents
- 11 May 2023
-
Digital Euro Investigation Phase - Scheme Rulebook Development Group documents
- 10 May 2023
-
Occasional Paper Series - Issue No. 316Details
- Abstract:
- This article focuses on some of the operational aspects of winding down a bank’s trading book portfolio and discusses the hidden exit costs that can sometimes exist. The article provides a deep dive on valuation principles and exit strategies currently considered by industry practitioners when designing a solvent wind-down plan. It also provides the reader with an overview of key underpinning valuation or pricing concepts, such as ‘fair value’, ‘realisable value’ and ‘solvent wind-down (SWD) value’.
- JEL Code:
- G12,G13,G14,G15,G17,G18,G32,G33,G34
- 10 May 2023
-
InterviewDetails
- Subtitle:
- Interview with Christine Lagarde, President of the ECB, conducted by Shogo Akagawa on 8 May 2023
- 10 May 2023
-
Working Paper Series - Issue No. 2814Details
- Abstract:
- The paper studies the central bank collateral framework and its impact on banks’ liquidity under an adverse stress test scenario. We construct a stress test model that accounts for a granular and multi-faceted representation of the liquidity of marketable and non-marketable assets. In particular, the model analyses banks’ strategic decisions to mobilise assets through four funding channels: unsecured loans, asset sales, private repurchase agreements, or Central Bank lending. We test three scenarios: the EBA regulatory stress test exercise, a shock to Russia and the Eastern European countries, and a shock to the Southern European countries. Results show that illiquidity can trigger insolvency and that liquidity adjustment can last significantly after the initial shock. We find evidence of a threshold in the benefits of expanding the collateral framework and highlight the heterogeneous effects across different jurisdictions and financial institutions. We find that bank equity losses are reduced in aggregate up to 17% at the tail of the loss distribution and on average by around 5% when financial institutions can rely on the collateral framework channel.
- JEL Code:
- C63,E52,G01,G28
- 10 May 2023
-
Working Paper Series - Issue No. 2813Details
- Abstract:
- Using evidence from the EU emissions trading system, we collect verified emissions of close to 4000 highly polluting and mostly non-listed firms responsible for 26% of EU’s emissions. Over the period 2013 - 2019, we find a non-linear relationship between leverage and emissions. A firm with higher leverage has lower emissions in subsequent years. However, when leverage exceeds 50%, a further increase is associated with higher emissions. Our difference-in-differences approach sheds light on the existence of a group of firms that are too indebted to successfully accomplish the low-carbon transition, even when they face a steep increase in the cost of their emissions.
- JEL Code:
- C58,E58,G32,Q51,Q56,Q58
- 9 May 2023
-
SpeechDetails
- Subtitle:
- Presentation by Isabel Schnabel, Member of the Executive Board of the ECB, at Hessischer Kreis e. V.
- 9 May 2023
-
Weekly financial statementAnnexes
- 9 May 2023
-
Weekly financial statement - Commentary
- 9 May 2023
-
The ECB BlogDetails
- JEL Code:
- G21,O16
- Subtitle:
- Diversity is a matter of sound governance for banks and leads to better decision-making. That is why Frank Elderson, Member of the Executive Board of the ECB and Vice-Chair of the Supervisory Board of the ECB, and Elizabeth McCaul, Member of the Supervisory Board of the ECB, are encouraging banks to improve the diversity of their boards.
- 8 May 2023
-
SpeechDetails
- Subtitle:
- Presentation by Philip R. Lane, Member of the Executive Board of the ECB, at the New Economy Forum in Berlin
- 8 May 2023
-
Working Paper Series - Issue No. 2812Details
- Abstract:
- We analyze jointly optimal carbon pricing and leverage regulation in a model with financial constraints and endogenous climate-related transition and physical risks. The socially optimal emissions tax is below the Pigouvian benchmark (equal to the direct social cost of emissions) when emissions taxes amplify financial constraints, or above this benchmark if physical climate risks have a substantial impact on collateral values. Additionally introducing leverage regulation can be welfare-improving only if tax rebates are not fully pledgeable. A cap-and-trade system or abatement subsidies may dominate carbon taxes because they can be designed to have a less adverse effect on financial constraints.
- JEL Code:
- D62,G28,G32,G38,H23
- Network:
- ECB Lamfalussy Fellowship Programme
- 8 May 2023
-
Working Paper Series - Issue No. 2811Details
- Abstract:
- To study implications of an interest-bearing CBDC on the economy, we integrate a New Monetarist-type decentralised market that explicitly accounts for the means-of-exchange function of bank deposits and CBDC into a New Keynesian model with financial frictions. The central bank influences the store-of-value function of money through a conventional Taylor rule while it affects the means-of-exchange function of money through CBDC operations. Peak responses to monetary policy shocks remain similar in the presence of an interest-bearing CBDC, implying that monetary transmission is not impaired. At the same time however, the provision of CBDC helps smooth responses to macroeconomic shocks. By supplying CBDC, the central bank contributes to stabilising the liquidity premium, thereby affecting bank funding conditions and the opportunity costs of money, which dampens and smoothes the reaction of investment and consumption to macroeconomic shocks.
- JEL Code:
- E58,E41,E42,E51,E52
- 8 May 2023
-
Survey of Monetary Analysts - Aggregate results
- 5 May 2023
- 5 May 2023
- 5 May 2023
- 5 May 2023
- 5 May 2023
-
Survey of Professional Forecasters - Issue No. 2023Annexes
- 5 May 2023
- 5 May 2023
-
SpeechDetails
- Subtitle:
- Speech by Frank Elderson, Member of the Executive Board of the ECB and Vice-Chair of the Supervisory Board of the ECB, State of the Union conference organised by the European University Institute
- 5 May 2023
- 5 May 2023
-
MFI interest rate statistics
- 5 May 2023
-
Other publication
- 5 May 2023
- 5 May 2023
-
Economic Bulletin - BoxEconomic Bulletin Issue 3, 2023Details
- Abstract:
- This box summarises the findings of recent contacts between ECB staff and representatives of 61 leading non-financial companies operating in the euro area. According to these exchanges, which took place between 30 March and 13 April, aggregate activity growth remained subdued in the first quarter of 2023, albeit with notable differences across sectors. Declining activity reported in the consumer goods, retail and construction sectors was offset by growth in the consumer services and capital goods sectors in particular. These developments were expected to continue in the short term, while uncertainty regarding the outlook for 2023 as a whole remained elevated. The rate of growth of selling prices continued to moderate, driven especially by developments in the energy, transport and intermediate goods sectors. Consequently, non-labour input costs stabilised for most firms. Expectations for wage growth remained strong and were broadly unchanged, with wage growth remaining the main cost concern for the surveyed companies.
- JEL Code:
- E2,E3,L2
- 4 May 2023
-
Combined monetary policy decisions and statementRelated
- 4 May 2023
-
Monetary policy statement
- 4 May 2023
-
Monetary policy decision
- 4 May 2023
-
Monetary policy statementDetails
- Subtitle:
- Christine Lagarde, President of the ECB, Luis de Guindos, Vice-President of the ECB, Frankfurt am Main, 4 May 2023
Related- 4 May 2023
-
Combined monetary policy decisions and statement
- 4 May 2023
-
Monetary policy decisionRelated
- 4 May 2023
-
Combined monetary policy decisions and statement
- 1 June 2023
-
Monetary policy account
- 3 May 2023
-
Disaggregated financial statement
- 3 May 2023
-
Weekly financial statementAnnexes
- 3 May 2023
-
Weekly financial statement - Commentary
- 2 May 2023
-
Press releaseRelated
- 2 May 2023
-
Euro area bank lending survey
- 2 May 2023
-
Monetary developments in the euro areaAnnexes
- 2 May 2023
-
Euro area bank lending surveyAnnexes
- 2 May 2023
-
Euro area bank lending survey - Annex
Related- 2 May 2023
-
Press release
- 2 May 2023
-
€STR Transparency on errors
- 28 April 2023
- 27 April 2023
-
SpeechDetails
- Subtitle:
- Presentation by Fabio Panetta, Member of the Executive Board of the ECB, at a meeting with the European Association of Co-operative Banks in Stockholm
- 27 April 2023
-
Euro area economic and financial developments by institutional sector (full)
- 27 April 2023
-
Other publicationAnnexes
- 27 April 2023
- 26 April 2023
-
Working Paper Series - Issue No. 2810Details
- Abstract:
- Households face earnings risk which is non-normal and varies by age and over the income distribution. We show that allowing for these rich features of earnings dynamics, in the context of a structurally estimated life-cycle portfolio choice model, helps to rationalize the limited participation of households in the stock market and their low holdings of risky assets. Because households are subject to more background risk than previously considered, the estimated model implies a substantially lower coefficient of risk aversion. We also find renewed support for rule-of-thumb investment strategies under the model with the nonlinear earnings process.
- JEL Code:
- G11,G12,D14,D91,J24,H06
- 26 April 2023
-
Macroprudential Bulletin - Article - Issue No. 21Details
- Abstract:
- This article discusses the possible implementation of a positive neutral rate for the countercyclical capital buffer (CCyB) as a means of increasing macroprudential policy space in the European banking union. Drawing on experience from the coronavirus (COVID-19) pandemic, it explains why a positive neutral rate is needed to enhance the effectiveness of the current macroprudential framework. It also describes recent progress on the application of this tool around the globe and concludes with some remarks on the calibration and potential future application of the tool in the banking union.
- 26 April 2023
-
Press releaseRelated
- 26 April 2023
-
Euro money market
- 26 April 2023
-
Euro money marketRelated
- 26 April 2023
-
Press release
- 25 April 2023
-
Weekly financial statementAnnexes
- 25 April 2023
-
Weekly financial statement - Commentary
- 25 April 2023
-
Working Paper Series - Issue No. 2809Details
- Abstract:
- Digitalisation has fundamentally changed the global economy and will continue to do so. This paper draws on economic research to identify some of its key implications for labour markets, inequality, e-commerce and the financial system. Beyond its potential to boost productivity and living standards, digitalisation: i) does not necessarily replace jobs on aggregate but changes their content; ii) tends to raise income and wealth inequality; iii) has ambiguous effects on competition; and iv) might change how the retail and financial sectors respond to monetary policy. Developing adequate (re-)training opportunities and providing a labour market, regulatory, and innovation environment which encourages the creation of “good jobs” is essential to improve productivity and equity while avoiding a polarisation of labour markets. E-commerce and fintech will likely lead to a faster transmission of monetary policy. The rise of fintech brings about new risks for regulatory arbitrage and has ramifications for financial stability.
- JEL Code:
- D31,D4,E52,G2
- Network:
- Discussion papers
- 25 April 2023
-
Discussion Paper Series - Issue No. 23Details
- Abstract:
- Digitalisation has fundamentally changed the global economy and will continue to do so. This paper draws on economic research to identify some of its key implications for labour markets, inequality, e-commerce and the financial system. Beyond its potential to boost productivity and living standards, digitalisation: i) does not necessarily replace jobs on aggregate but changes their content; ii) tends to raise income and wealth inequality; iii) has ambiguous effects on competition; and iv) might change how the retail and financial sectors respond to monetary policy. Developing adequate (re-)training opportunities and providing a labour market, regulatory, and innovation environment which encourages the creation of “good jobs” is essential to improve productivity and equity while avoiding a polarisation of labour markets. E-commerce and fintech will likely lead to a faster transmission of monetary policy. The rise of fintech brings about new risks for regulatory arbitrage and has ramifications for financial stability.
- JEL Code:
- D31,D4,E52,G2
- 25 April 2023
- 25 April 2023
-
InterviewDetails
- Subtitle:
- Interview with Philip R. Lane, Member of the Executive Board of the ECB, conducted by Eric Albert on 18 April 2023
- 24 April 2023
-
InterviewDetails
- Subtitle:
- Interview with Isabel Schnabel, Member of the Executive Board of the ECB, conducted by Johanna Treeck on 20 April 2023
- 24 April 2023
- 24 April 2023
-
SpeechDetails
- Subtitle:
- Introductory statement by Fabio Panetta, Member of the Executive Board of the ECB, at the Committee on Economic and Monetary Affairs of the European Parliament
Related- 24 April 2023
- 24 April 2023
-
Digital Euro Governance
- 24 April 2023
-
Press release
- 24 April 2023
-
Digital Euro Investigation Phase - Progress ReportRelated
- 24 April 2023
- 24 April 2023
- 24 April 2023
-
Press releaseAnnexes
- 24 April 2023
-
Press release
Related- 24 April 2023
-
Digital Euro Governance
- 24 April 2023
-
SpeechDetails
- Subtitle:
- Speech by Fabio Panetta, Member of the Executive Board of the ECB, at an event on “Integration, multilateralism and sovereignty: building a Europe fit for new global dynamics” organised by Bruegel
- 24 April 2023
-
Press releaseRelated
- 24 April 2023
-
Other publication
- 24 April 2023
-
The ECB BlogDetails
- JEL Code:
- Q54
- Subtitle:
- The EU has a problem with climate catastrophe insurance: only a quarter of the losses from climate-related disasters are covered. Greater coverage could reduce the economic damage that results from them. This joint ECB-EIOPA post for The ECB Blog looks at ways to make this happen.
- 24 April 2023
-
Other publicationRelated
- 24 April 2023
- 21 April 2023
-
SpeechDetails
- Subtitle:
- Speech by Frank Elderson, Member of the Executive Board of the ECB and Vice-Chair of the Supervisory Board of the ECB, at the Peterson Institute for International Economics
- 21 April 2023
-
Governing Council decisions - Other decisions
- 21 April 2023
- 20 April 2023
-
SpeechDetails
- Subtitle:
- Slides by Isabel Schnabel, Member of the Executive Board of the European Central Bank, at Stanford Graduate School of Business (GSB)
- 20 April 2023
-
Occasional Paper Series - Issue No. 315Details
- Abstract:
- Fiscal policy plays a prominent role in climate change mitigation and adaptation. An optimal combination of revenue policies, in particular taxes, and expenditure policies, such as subsidies and investment, is essential in order to achieve greenhouse gas emissions targets. This paper analyses the main fiscal instruments in place in European Union Member States, focusing on specific issues, such as the fiscal impact of extreme weather events, the interaction between debt sustainability and climate change, the green investment gap and the distributional impact of climate policies. The paper aims to provide an overview of existing fiscal policies and of the main fiscal challenges for a comprehensive European climate change strategy.
- JEL Code:
- H2,H5,H6,Q54,Q58,D63
- 20 April 2023
-
Monetary policy accountRelated
- 16 March 2023
-
Monetary policy decision
- 20 April 2023
-
Research Bulletin - Issue No. 106Details
- Abstract:
- (Why) do prices and inflation rates differ within the euro area? We study the relevance of a national border for grocery prices in the otherwise homogenous and highly integrated border region between Austria and Germany. Using transaction data on prices and quantities from a large household panel survey, we compare the prices of identical products within a narrow band along the border. We find large assortment and price differences between the two countries. Even within multinational retail chains the prices of identical products on each side of the border differ on average by about 21%. These price differences are not very persistent, indicating little arbitrage gain from undifferentiated cross-border shopping. Product-level inflation rates differ for only half of the retail chains. Our results highlight the importance of the historical evolution of distribution networks and of the structure of the sales organisation as a driver of price and inflation heterogeneity.
- JEL Code:
- D12,E31,D43,F15,F4
- 19 April 2023
-
SpeechDetails
- Subtitle:
- Slides by Isabel Schnabel, Member of the Executive Board of the ECB, at the Zentrum für Europäische Wirtschaftsforschung (ZEW) in Mannheim
- 19 April 2023
- 19 April 2023
- 19 April 2023
- 19 April 2023
- 19 April 2023
-
SpeechDetails
- Subtitle:
- Keynote address by Philip R. Lane, Member of the Executive Board of the ECB, at the Enterprise Ireland Summit 2023
- 19 April 2023
-
Working Paper Series - Issue No. 2808Details
- Abstract:
- Financial stability indicators can be grouped into financial stress indicators that reflect heightened spreads and market volatility, and financial vulnerability indicators that reflect credit and asset price imbalances. Based on a panel of euro area countries, we show that both types of indicators contain information about downside risks to real GDP growth (growth-at-risk) in the short-term (1-year ahead). However, only vulnerability indicators contain information about growth-at-risk in the medium-term (3-years ahead and beyond). Among various vulnerability indicators suggested in the literature, the Systemic Risk Indicator (SRI) proposed by Lang et al. (2019) outperforms in terms of in-sample explanatory power and out-of-sample predictive ability for medium-term growth-at-risk in euro area countries. Shocks to the SRI induce a rich ”term structure” for growth-at-risk: downside risks to real GDP growth are reduced in the short-term, but over the medium-term the effect reverses and downside risks to real GDP growth go up considerably. We also show that using cross-country information from the panel of euro area countries can improve the out-of-sample forecasting performance of growth-at-risk for the euro area aggregate.
- JEL Code:
- E37,E44,G01,G17,C22
- 19 April 2023
-
The ECB BlogDetails
- JEL Code:
- E59
- Subtitle:
- Croatia officially joined the euro area on 1 January. A previous blog post discussed the many changes this heralded for the country. But the new arrival also changed certain aspects of how things work at the ECB, as shown in this ECB Blog post.
- 19 April 2023
-
Balance of payments (monthly)
- 18 April 2023
- 18 April 2023
-
Weekly financial statementAnnexes
- 18 April 2023
-
Weekly financial statement - Commentary
- 18 April 2023
-
Working Paper Series - Issue No. 2807Details
- Abstract:
- This study applies a model averaging approach to conditionally forecast housing investment in the largest euro area countries and the euro area. To account for substantial modelling uncertainty, it estimates many vector error correction models (VECMs) using a wide set of short and long-run determinants and selects the most promising specifications based on in-sample and out-of-sample criteria. Our results highlight marked cross-country heterogeneity in the key drivers of housing investment which calls for country-specific housing market policies. A pseudo out-of-sample forecast exercise shows that our model averaging approach beats a battery of ambitious benchmark models, including BVARs, FAVARs, LASSO and Ridge regressions. This suggests that there is ample scope for model averaging tools in forecast exercises, notably as they also help to reduce model uncertainty and can be used to assess forecast uncertainty.
- JEL Code:
- C32,C51,C52,C53,E22
- 17 April 2023
-
SpeechDetails
- Subtitle:
- Speech by Christine Lagarde, President of the ECB, at the Council on Foreign Relations’ C. Peter McColough Series on International Economics
- 17 April 2023
-
Survey of Monetary Analysts
- 14 April 2023
-
SpeechDetails
- Subtitle:
- Statement by Christine Lagarde, President of the ECB, at the forty-seventh meeting of the International Monetary and Financial Committee
- 13 April 2023
-
Working Paper Series - Issue No. 2806Details
- Abstract:
- Interconnectedness is an inherent feature of the modern financial system. While it con-tributes to efficiency of financial services, it also creates structural vulnerabilities: pernicious shock transmission and amplification impacting banks’ capitalization. This has recently been seen during the Global Financial Crisis. Post-crisis reforms addressed many of the causes of this event, but contagion effects may not be fully eliminated. One reason for this may be related to financial institutions’ incentives and strategic behaviours. We propose a model to study contagion effects in a banking system capturing network effects of direct exposures and indirect effects of market behaviour that may impact asset valuation. By doing so, we can embed a well-established fire-sale channel into our model. Unlike in related literature, we relax the assumption that there is an exogenous pecking order of how banks would sell their assets. Instead, banks act rationally in our model; they optimally construct a portfolio subject to budget constraints so as to raise cash to satisfy creditors (interbank and external). We assume that the guiding principle for banks is to maximize risk-adjusted returns gener-ated by their balance sheets. We parameterize the theoretical model with publicly available data for a representative sample of European banks; this allows us to run simulations of bank valuations and asset prices under a set of stress scenarios.
- JEL Code:
- C62,C63,G11,G21
- 13 April 2023
-
Working Paper Series - Issue No. 2805Details
- Abstract:
- Are central bank tools effective in reaching non-banks with no access to the lender-of-last-resort facilities? Using runs on mutual funds in March 2020 as a laboratory, we show that, following the announcement of large-scale purchases, funds with higher ex ante shares of assets eligible for central bank purchases saw their performance improve by 3.6 percentage points and outflows decrease by 61% relative to otherwise similar funds. Following central bank liquidity provision to banks, the growth rate of repo lending to funds by banks more exposed to the system-wide liquidity crisis was up to five times higher compared to other banks.
- JEL Code:
- E58,G01,G10,G21,G23
- 12 April 2023
-
Weekly financial statementAnnexes
- 12 April 2023
-
Weekly financial statement - Commentary
- 12 April 2023
-
Survey on credit terms and conditions in euro-denominated securities financing and OTC derivatives marketsAnnexes
- 12 April 2023
-
Other publication
Related- 12 April 2023
- 14 April 2021
- 12 April 2023
-
Press releaseRelated
- 12 April 2023
- 12 April 2023
-
The ECB BlogDetails
- JEL Code:
- F51
- Subtitle:
- Sanctions and voluntary boycotts have forced Russia to change its international trade since its invasion of Ukraine. The country has reoriented towards the east, away from Europe. This ECB Blog post sheds light on these shifts. It is the third entry in a series about the economic effects of the war.
- 12 April 2023
-
Digital Euro Investigation Phase - Scheme Rulebook Development Group documents
- 12 April 2023
-
Digital Euro Investigation Phase - Scheme Rulebook Development Group documents
- 6 April 2023
-
InterviewDetails
- Subtitle:
- Interview with Philip R. Lane, Member of the Executive Board of the ECB, conducted by Gregory Savva on 5 April
- 5 April 2023
-
SpeechDetails
- Subtitle:
- Lecture by Philip R. Lane, Member of the Executive Board of the ECB, at the University of Cyprus
- 5 April 2023
-
Disaggregated financial statement
- 5 April 2023
-
Weekly financial statementAnnexes
- 5 April 2023
-
Weekly financial statement - Commentary
- 5 April 2023
-
Euro area economic and financial developments by institutional sector (early)
- 5 April 2023
-
Occasional Paper Series - Issue No. 314Details
- Abstract:
- In this paper we aim to provide a holistic understanding of the Initial Margin (IM) models used by Central Counterparties (CCPs) in Europe. In addition to discussing their relevance in terms of CCP risk management and their importance for the functioning of financial markets, we provide an overview of the main modelling frameworks used, including Standard Portfolio Analysis of Risk (SPAN) and Value at Risk (VaR) models.By leveraging on publicly available data, we provide an up-to-date picture of current modelling practices for specific cleared product classes, as well as various trends in IM modelling practices in Europe. We show how IM model frameworks vary materially, depending on the CCP’s past choices and the products it clears. Despite a propensity to switch to VaR models, idiosyncrasies and differences across CCPs are likely to persist.We conclude by highlighting current and upcoming challenges and risks to CCP IM model frameworks and linking the current status quo with ongoing and upcoming regulatory work at European and international level.
- JEL Code:
- G15,G18,G19,G23,G28,G32
- 5 April 2023
-
Balance of payments (quarterly)
- 4 April 2023
-
Press release
- 4 April 2023
-
Consumer Expectation Survey
- 4 April 2023
-
Consumer Expectation Survey
- 4 April 2023
-
Consumer Expectation Survey
- 4 April 2023
-
Consumer Expectation Survey
- 3 April 2023
-
Macroprudential Bulletin - Article - Issue No. 20Details
- Abstract:
- This article analyses the financial stability risks of investment funds active in euro area commercial real estate (CRE) markets. It finds that real estate investment funds (REIFs) have grown significantly in the past decade, and have a large market footprint in several euro area countries where the outlook for CRE markets has deteriorated sharply. In addition, REIFs are exposed to liquidity risk when they offer frequent redemptions, which could affect the stability of CRE markets. REIFs should therefore be subject to a common and comprehensive policy framework to reduce the liquidity mismatch and risks to financial stability.
- JEL Code:
- G23,R33
- 1 April 2023
-
InterviewDetails
- Subtitle:
- Interview with Fabio Panetta, Member of the Executive Board of the ECB, published as an article by Eshe Nelson entitled “Are Big Profits Keeping Prices High? Some Central Bankers Are Concerned.” in The New York Times, 31 March 2023
- 1 April 2023
-
SpeechDetails
- Subtitle:
- Introductory remarks by Luis de Guindos, Vice-President of the ECB, at the 34th edition of “The outlook for the economy and finance”, organized by the European House – Ambrosetti
- 31 March 2023
-
Governing Council decisions - Other decisions
- 31 March 2023
-
MFI interest rate statistics
- 31 March 2023
-
Press release
- 30 March 2023
-
Working Paper Series - Issue No. 2804Details
- Abstract:
- In sticky price models, the slope of the Phillips curve depends positively on the probability of price adjustment. I use a series for the empirical frequency of price adjustment to test this implication. I find some evidence that the Phillips curve slope depends positively on the repricing rate. My results support the implication from New Keynesian theory with Calvo pricing that the Phillips curve slope is a convex function of the frequency of price adjustment. However, at all observed values of the frequency of price adjustment, the empirical Phillips curve relation is much flatter than the New Keynesian Phillips Curve at standard parameter values would imply.
- JEL Code:
- C22,E31
- Network:
- Price-setting Microdata Analysis Network (PRISMA)
- 30 March 2023
-
Working Paper Series - Issue No. 2803Details
- Abstract:
- We study the effects of low short-term interest rates on the optimal portfolio allocation in Markowitz portfolios and Risk parity portfolios. We propose a measure of Portfolio Instabil-ity, gauging the amount of optimal portfolio shifts needed to respond to exogenous shocks to the expected risk and return of the risky portfolio assets. Portfolio Instability, i.e. the selling pressure on riskier asset holdings, is found to be stronger the lower the risk-free interest rate. Heightened portfolio instability in the presence of low rates is found to emerge through two channels both of which incentivise the build-up of large and leveraged risky asset shares during calm periods which need to be unwound in the event of higher market volatility: first, low rates (mechanically) augment the excess return to be gained by investing in riskier assets and second, they are found to dampen volatility of riskier assets in the portfolio. The inverse relationship between portfolio instability and the risk-free rates is found to increase the closer the risk-free rate approaches the effective lower bound. Counterfactual analyses of the behaviour of optimal multi-asset portfolios demonstrate that the sell-off in riskier asset classes during the Covid crisis in March 2020 was more severe than would have been in the presence of higher short-term interest rates.
- JEL Code:
- C58,E52,G11,G12
- 30 March 2023
- 30 March 2023
-
The ECB BlogDetails
- JEL Code:
- E31
- Subtitle:
- High energy prices have dented real incomes. How to allocate these losses is at the heart of recent negotiations between firms and workers. If both sides try to unilaterally offset any real income losses, this could trigger successive wage and price increases, and create risks of an upward spiral that could make everyone poorer.
- 30 March 2023
-
Economic Bulletin
- 30 March 2023
-
Economic Bulletin - BoxEconomic Bulletin Issue 2, 2023Details
- Abstract:
- This box provides updated estimates on the fiscal support provided by euro area governments in response to the energy crisis and high inflation, reflecting the March 2023 ECB staff macroeconomic projections. It also gives granular information on the design and timing of these fiscal policy support measures.
- JEL Code:
- E62,E31,E63
- 30 March 2023
-
Economic Bulletin - BoxEconomic Bulletin Issue 2, 2023Details
- Abstract:
- This box describes the ECB’s liquidity conditions and monetary policy operations during the seventh and eighth maintenance periods of 2022, from 2 November 2022 to 7 February 2023.
- JEL Code:
- E40,E52,E58
- 30 March 2023
-
Economic Bulletin - BoxEconomic Bulletin Issue 2, 2023Details
- Abstract:
- Market-based measures of inflation compensation and market-implied real interest rates contain important information for monetary policy analysis but are available for the euro area only for the period since 2005. However, since they are correlated with other macroeconomic and financial variables that are available for longer periods, it is possible to construct time series for market-based measures of inflation compensation and real rates going back to 1992, using a penalised regression approach. These time series can be used as an input into econometric analysis and for illustrating stylised facts and historical patterns.
- JEL Code:
- C53,E31,E43
- 30 March 2023
-
Economic Bulletin - BoxEconomic Bulletin Issue 2, 2023Details
- Abstract:
- The box provides an assessment of the impact of the pandemic on the exports of firms involved in global value chains (“GVC” firms), based on firm-level data for France. Following the outbreak of the pandemic, GVC firms, defined as firms that both export and import, faced disruptions in their supplies from source countries. These shortages of intermediate inputs traded via global value chains constrained firms’ production and exports. The weaker export performance of GVC firms relative to other exporters coincided with the emergence of supply bottlenecks, which suggests that these disruptions were a key factor holding back the performance of firms involved in global value chains. Estimates in this box suggest that these supply-side disruptions had a significant downward impact on exports in the euro area in 2020 and 2021.
- JEL Code:
- D22,F14,F61
- 30 March 2023
-
Economic Bulletin - BoxEconomic Bulletin Issue 2, 2023Details
- Abstract:
- This box studies the impact that the Federal Reserve’s tightening of monetary policy has on emerging market economies (EMEs) and analyses the factors shaping those spillovers. We use a local projections empirical framework to examine the ways in which EMEs’ macroeconomic and macro-financial variables respond to US monetary policy shocks identified at high frequency. In line with academic literature, our baseline results show that a surprise tightening of US monetary policy is associated with immediate tightening of EMEs’ financial conditions, after which industrial production and inflation decline, with that effect peaking after around 18 months. We find that heterogeneity across EMEs is shaped by macro-financial vulnerabilities and monetary policy actions at the national level: domestic macro-financial vulnerabilities clearly matter, amplifying EMEs’ sensitivity to US monetary policy shocks, while maintaining a prudent monetary policy stance helps EMEs to mitigate spillovers from US monetary policy.
- JEL Code:
- C32,E52,E58
- 30 March 2023
-
InterviewDetails
- Subtitle:
- Interview with Frank Elderson, Member of the Executive Board of the ECB and Vice-Chair of the Supervisory Board of the ECB, conducted by Lluís Pellicer
- 29 March 2023
-
SpeechDetails
- Subtitle:
- Slides by Isabel Schnabel, Member of the Executive Board of the ECB, at the 39th Annual NABE Economic Policy Conference
- 29 March 2023
-
InterviewDetails
- Subtitle:
- Interview with Philip R. Lane, Member of the Executive Board of the ECB, conducted on 22 March by Kolja Rudzio
- 29 March 2023
-
Working Paper Series - Issue No. 2802Details
- Abstract:
- Fiscal policy constitutes a key tool for business cycle stabilisation next to monetary policy. In this context, having a well-suited macroeconomic model for analysing fiscal policy at a central bank is of primary importance. This paper documents the fiscal block of the ECB-BASE, which is a semi–structural model for the euro area developed at the ECB for projections and policy analysis. The set-up of the fiscal block ensures comprehensive coverage of the government sector and tight links to the quarterly fiscal accounts. Thanks to this design, it is possible to simulate the model with a wide range of fiscal shocks, which, as shown in the paper, have distinct propagation mechanisms. Having discussed the set-up and the potency of fiscal policy in the model, this paper also includes the following applications for fiscal policy analysis: counterfactual scenarios with alternative fiscal rules, assessment of fiscal policy conducted in the euro area in the past and stochastic fiscal projections.
- JEL Code:
- C3,C5,E1,E2,E6
- 29 March 2023
-
Working Paper Series - Issue No. 2801Details
- Abstract:
- The bulk of euro-denominated cash is held for store of value purposes, with such holdings sharply increasing in times of high economic uncertainty. We develop a Diamond and Dy-bvig model with public money as a store of value and heterogeneous beliefs about bank stability that accounts for this evidence. Consumers who are sufficiently pessimistic prefer to hold cash. In our model, the introduction of a central bank digital currency (CBDC) as a store of value that is superior to cash leads to bank disintermediation as some depositors opt for switching to CBDC based on their beliefs. While CBDC partially replaces deposits, long-term lending decreases less than proportionally as remaining depositors are, on aver-age, more optimistic about bank stability and banks re-balance their portfolio accordingly. The appropriate calibration of CBDC design features such as remuneration and quantity limits can mitigate these effects. We study the individual and social welfare implications of introducing CBDC as a store of value.
- JEL Code:
- E41,E58,G11,G21
- 29 March 2023
-
The ECB BlogDetails
- JEL Code:
- H12
- Subtitle:
- What is the best way to absorb economic shocks? Some approaches favour private risk sharing, others, public risk sharing. In this ECB Blog post we argue that a combination of both offers the best protection for European citizens against poor economic performance.
- 29 March 2023
-
Economic Bulletin - BoxEconomic Bulletin Issue 2, 2023Details
- Abstract:
- This box presents a stylised, model-based, general equilibrium assessment of the global economic effects of trade fragmentation. The focus is on a rather extreme scenario in which two hypothetical geopolitical blocs raise barriers to trade in intermediate goods, causing a relocation of supply chains to countries within the same bloc (“friend-shoring”). Using a model developed by Baqaee and Farhi, we find that economic losses (in terms of welfare, trade and prices) can be sizeable, depending on the degree of rigidities embedded in the model. Effects are also heterogeneous across countries, as small, open economies that are reliant on global value chains are more affected. The findings in this box suggest that trade fragmentation would be a lose-lose situation for all parties involved and leave the global economy more vulnerable to shocks.
- JEL Code:
- F12,F13,O33
- 28 March 2023
-
Weekly financial statementAnnexes
- 28 March 2023
-
Weekly financial statement - Commentary
- 28 March 2023
-
Occasional Paper Series - Issue No. 313Details
- Abstract:
- In recent years, several proposals have emerged from the policy and academic spheres to address climate and energy-related public investment needs in the European Union (EU) with an EU-level instrument. This paper provides an analytical contribution to the discussion by examining the rationale for an EU Climate and Energy Security Fund, with a focus on its legal and institutional feasibility.
- 28 March 2023
-
Occasional Paper Series - Issue No. 312Details
- Abstract:
- In implementing its monetary policy, the ECB conducts collateralised credit operations with banks. The bulk of the financial risks involved in these collateralised credit operations are mitigated primarily by the valuation haircuts imposed on the mobilised collateral. Since the establishment of the euro in January 1999, valuation haircuts have been formulated mainly on the basis of risk management considerations and have been systematically calibrated with a very low level of risk tolerance. However, their implied risk tolerance may sometimes be used as a monetary policy stance lever, as clearly illustrated when the ECB decided to reduce haircuts to improve funding conditions for the real economy during the outset of the coronavirus (COVID-19) pandemic. In addition, the ECB ensures that financial market developments warranting general methodological changes are incorporated into the calibration of valuation haircuts adequately and in good time. In a particularly challenging economic environment, the ECB has also recently committed to ensuring that climate change risks are considered when calibrating the valuation haircuts applied to corporate bonds. Against this background, the purpose of this paper is to provide an overview and explanation of the main guiding rules, as well as explaining some of the statistical methods currently employed by the ECB when formulating valuation haircuts. Keywords: monetary policy implementation, risk control framework of credit operations, valuation haircuts
- JEL Code:
- D02,E58,G32,Q54
- 28 March 2023
-
Economic Bulletin - BoxEconomic Bulletin Issue 2, 2023Details
- Abstract:
- In 2022 the ECB conducted a climate risk stress test of some of the major financial exposures on the Eurosystem balance sheet. This box details the key features of the exercise and its main outcomes.
- JEL Code:
- C53,C58,D81,E58,G32,Q54
- 27 March 2023
-
SpeechDetails
- Subtitle:
- Speech by Isabel Schnabel, Member of the Executive Board of the ECB, at an event organised by Columbia University and SGH Macro Advisors
Annexes- 27 March 2023
-
Speech
- 27 March 2023
-
SpeechDetails
- Subtitle:
- Keynote speech by Frank Elderson, Member of the Executive Board of the ECB and Vice-Chair of the Supervisory Board of the ECB, at the Foreign Bankers’ Association (FBA) 30th anniversary
- 27 March 2023
-
Occasional Paper Series - Issue No. 311Details
- Abstract:
- Over the past decade, geopolitical developments – and the policy responses to these by major economies around the world – have challenged economic openness and the process of globalisation, with implications for the economic environment in which central banks operate. The return of war to Europe and the energy shock triggered by the Russian invasion of Ukraine in 2022 are the latest in a series of episodes that have led the European Union (EU) to develop its Open Strategic Autonomy (OSA) agenda. This Report is a broad attempt to take stock of these developments from a central banking perspective. It analyses the EU’s economic interdependencies and their implications for trade and finance, with a focus on strategically important dimensions such as energy, critical raw materials, food, foreign direct investment and financial market infrastructures. Against this background, the Report discusses relevant aspects of the EU’s OSA policy agenda which extends to trade, industrial and state aid measures, as well as EU initiatives to strengthen and protect the internal market and further develop Economic and Monetary Union (EMU). The paper highlights some of the policy choices and trade-offs that emerge in this context and possible implications for the ECB’s monetary policy and other policies.
- JEL Code:
- F0,F10,F30,F4,F5,F45,E42,L5,Q43
- 27 March 2023
-
Monetary developments in the euro areaAnnexes
- 27 March 2023
-
Economic Bulletin - BoxEconomic Bulletin Issue 2, 2023Details
- Abstract:
- This box assesses the uneven economic effects of the recent surge in energy prices across households and firms in the euro area. The box first uses disaggregated data to disentangle the effects of the deterioration in the energy terms of trade on final expenditures and aggregate income, allocating the implied purchasing power losses across the household income distribution. The box then uses structural economic models to identify the energy price shock underlying the recent terms-of-trade deterioration and to gauge its direct, indirect and second-round effects on the overall economy. As regards the results, the different exposures of households to higher energy costs and lower income indicate a relatively larger impact of the energy terms-of-trade deterioration on lower-income households. The direct and indirect effects of the energy price shock mainly impacted private consumption on the expenditure side and non-energy sectors on the income side. The second-round effects spread the impact more evenly across private consumption and investment, with the government partially shielding private sector disposable income.
- JEL Code:
- E31,E21
- 27 March 2023
-
Economic Bulletin - BoxEconomic Bulletin Issue 2, 2023Details
- Abstract:
- This box provides initial evidence of the impact on global oil markets and Russian oil flows of the EU embargo and the G7 price cap on Russian oil imposed in response to Russia’s war of aggression in Ukraine. Overall, international oil prices have declined amid resilient supply from Russia and lower global demand, despite the expected rebound of the Chinese economy. After some initial bottlenecks, Russia managed to redirect most of its crude oil exports from Europe to Asia, but only by continuing to offer significant price discounts relative to global prices. However, a stronger impact on global oil markets could still materialise, particularly as, since February, Russia has officially prohibited sales of crude oil to countries that adhere to the price cap mechanism. In addition, the sanctions on refined oil products are only in the early phase of implementation, with initial evidence showing that Russia is partly redirecting those flows towards Africa and unknown destinations while, in the absence of Russian imports, the European diesel market remains tight.
- JEL Code:
- E21,E32
- 26 March 2023
-
SpeechDetails
- Subtitle:
- Slides by Isabel Schnabel, Member of the Executive Board of the ECB, at the Chicago Booth Conference on the Global Economy and Financial Stability
- 26 March 2023
-
InterviewDetails
- Subtitle:
- Interview with Luis de Guindos, Vice-President of the ECB, conducted by Daniel Murray
- 24 March 2023
-
The ECB BlogDetails
- JEL Code:
- Q54
- Subtitle:
- The ECB is for the first time disclosing the carbon footprint of its own investment portfolios and the Eurosystem’s corporate sector holdings. Executive Board members Frank Elderson and Isabel Schnabel explain the progress made and the next steps needed to decarbonise the portfolios of the ECB and the Eurosystem.
- 23 March 2023
-
SpeechDetails
- Subtitle:
- Presentation by Philip R. Lane, Member of the Executive Board of the ECB, at PIIE conference "Floating Exchange Rates at Fifty", Washington DC
- 23 March 2023
-
Working Paper Series - Issue No. 2800Details
- Abstract:
- During the March 2020 market turmoil, euro area money-market funds (MMFs) expe-rienced significant outflows, reaching almost 8% of assets under management. This paper investigates whether the volatility in MMF flows was driven by investors’ liquidity needs re-lated to derivative margin payments. We combine three highly granular unique data sources (EMIR data for derivatives, SHSS data for investor holdings of MMFs and Refinitiv Lip-per data for daily MMF flows) to construct a daily fund-level panel dataset spanning from February to April 2020. We estimate the effects of variation margin paid and received by the largest holders of EUR-denominated MMFs on flows of these MMFs. The main findings suggest that variation margin payments faced by some investors holding MMFs were an im-portant driver of the flows of EUR-denominated MMFs domiciled in euro area.
- JEL Code:
- G13,G15,G23
- 23 March 2023
- 23 March 2023
-
Climate-related financial disclosures
- 23 March 2023
-
Climate-related financial disclosures
- 22 March 2023
-
SpeechDetails
- Subtitle:
- Speech by Fabio Panetta, Member of the Executive Board of the ECB, at a panel on “Global shocks, policy spillovers and geo-strategic risks: how to coordinate policies” at The ECB and its Watchers XXIII Conference
Annexes- 22 March 2023
- 22 March 2023
-
Working Paper Series - Issue No. 2799Details
- Abstract:
- Flows of funds run by banks or by firms that belong to the same financial group as a bank are less volatile and less sensitive to bad past performance. This enables bank-affiliated funds to better weather distress and to hold lower precautionary cash buffers in comparison with their unaffiliated peers. Banks provide liquidity support to distressed affiliated funds by buying shares of those funds that are experiencing large outflows. This, in turn, diminishes the severity of strategic complementarities in investors’ redemptions. Liquidity support and other benefits of bank affiliation are conditional on the financial health of the parent company. Distress in the banking system spills over to the mutual fund sector via ownership links. Our research high-lights substantial dependencies between the banking system and the asset management industry, and identifies an important channel via which financial stability risks depend on the organisational structure of the financial sector.
- JEL Code:
- G2,G23,G3
- 22 March 2023
-
Working Paper Series - Issue No. 2798Details
- Abstract:
- This paper assesses the impact of weather shocks on inflation components in the four largest euro area economies. We combine high-frequency weather data with monthly data on inflation and output growth within a set of Bayesian Vector Autore-gressions which explicitly considers the seasonal dependence of the shock. Results suggest the presence of significant country asymmetries and seasonal responses of inflation to temperature shocks, mainly via food, energy, and service prices. An increase in monthly mean temperatures has inflationary effects in summer and au-tumn, with a stronger response in warmer euro area countries. An increase in temperature variability has significant upward impacts on inflation rates over and above the impacts of changes in means.
- JEL Code:
- Q54,E31,C32
- 22 March 2023
-
SpeechDetails
- Subtitle:
- Presentation by Philip R. Lane, Member of the Executive Board of the ECB, at “The ECB and Its Watchers XXIII” conference
- 22 March 2023
-
Balance of payments (monthly)
- 22 March 2023
-
SpeechDetails
- Subtitle:
- Speech by Christine Lagarde, President of the ECB, at “The ECB and Its Watchers XXIII” conference
- 22 March 2023
-
Research Bulletin - Issue No. 105Details
- Abstract:
- We assess the impact of the pandemic and the ensuing disruptions to global value chains (GVCs) on exporting firms. We find that firms’ participation in GVCs increased their vulnerability to the pandemic shock, in terms of export sales and probability of survival. Firms further downstream in GVCs were more severely affected by supply disruptions. At the same time, our results suggest that exporting firms benefited from sourcing their core inputs from different countries, supporting the hypothesis that diversification in global value chains fosters supply chain resilience.
- JEL Code:
- D22,F14,F61
- 21 March 2023
-
Weekly financial statementAnnexes
- 21 March 2023
-
Weekly financial statement - Commentary
- 21 March 2023
-
Press release
- 21 March 2023
-
Working Paper Series - Issue No. 2797Details
- Abstract:
- We study alternative monetary policy strategies in the presence of the lower bound on nominal interest rates and a low equilibrium real rate using an estimated DSGE model for the euro area. We find that simple feedback rules that implement inflation targeting result in a binding lower bound one-fourth of the time as well as inflation and output exhibiting large downward biases and heightened volatility. Rule-based asset purchases that are activated once the policy rate reaches the lower bound are not able to fully offset the destabilizing effects of the lower bound if we assume plausible limits on the size of purchases. Makeup strategies, especially average inflation targeting with a long averaging window, perform better than inflation targeting. However, differences in performance across strategies become small if the response coefficients of the feedback rules are optimized. In addition, we find that the benefits of makeup strategies tend to vanish if agents exhibit a degree of inattention to central bank policies as estimated in the data.
- JEL Code:
- E31,E32,E37,E52,E58,E61,E71
- 21 March 2023
-
Working Paper Series - Issue No. 2796Details
- Abstract:
- At the onset of the Covid-19 outbreak, central banks and supervisors introduced dividend restrictions as a new policy instrument aimed at supporting lending to the real economy and strengthening banks’ capacity to absorb losses. In this paper we estimate the impact of the ECB’s dividend recommendation on bank lending and risk-taking. To address identification issues, we rely on credit registry data and a direct measure that captures variation in compliance with the recommendation across banks in the euro area. The analysis disentangles the confounding effects stemming from the wide range of monetary and fiscal policies that supported credit during the Covid-19 downturn and investigates their interaction with the dividend recommendation. We find that dividend restrictions have been an effective policy in supporting financially constrained firms, adding capital space to banks, and limiting procyclical behaviour. The effects on lending are larger for small and medium enterprises and for firms operating in Covid-19 vulnerable sectors. At the same time, we do not find evidence of a significant increase in lending to riskier borrowers and ”zombie” firms.
- JEL Code:
- E5,E51,G18,G21
- 20 March 2023
-
SpeechDetails
- Subtitle:
- Speech by Christine Lagarde, President of the ECB, at the Hearing of the Committee on Economic and Monetary Affairs of the European Parliament
Annexes- 20 March 2023
- 20 March 2023
- 20 March 2023
-
Survey of Monetary Analysts - Aggregate results
- 19 March 2023
- 19 March 2023
- 17 March 2023
- 17 March 2023
- 17 March 2023
-
Working Paper Series - Issue No. 2795Details
- Abstract:
- This paper evaluates the resilience benefits of borrower-based macroprudential policies—such as LTV, DSTI, or DTI caps—for households and banks in the EU. To that end, we employ a further developed variant of the integrated micro-macro simulation model of Gross and Población (2017). Besides various methodological advances, joint policy caps are now also considered, and the resilience benefits are decomposed across income and wealth categories of borrowing households. Our findings suggest that (1) the resilience of households improves notably as a result of implementing individual and joint policy limits, with joint limits being more than additively effective; (2) borrower-based measures can visibly enhance the quality of bank mortgage portfolios over time, supporting bank solvency ratios; and (3) the policies’ resilience benefits are more pronounced for households located at the lower end of the income and wealth distributions.
- JEL Code:
- C33,E58,G18
- 16 March 2023
- 16 March 2023
-
Macroeconomic projections for the euro areaAnnexes
- 16 March 2023
- 16 March 2023
-
Combined monetary policy decisions and statementRelated
- 16 March 2023
-
Monetary policy statement
- 16 March 2023
-
Monetary policy decision
- 16 March 2023
-
Monetary policy statementDetails
- Subtitle:
- Christine Lagarde, President of the ECB, Luis de Guindos, Vice-President of the ECB, Frankfurt am Main, 16 March 2023
Related- 16 March 2023
-
Combined monetary policy decisions and statement
- 16 March 2023
-
Monetary policy decisionRelated
- 16 March 2023
-
Combined monetary policy decisions and statement
- 20 April 2023
-
Monetary policy account
- 16 March 2023
-
Euro area pension fund statisticsAnnexes
- 14 March 2023
-
Occasional Paper Series - Issue No. 310Details
- Abstract:
- Macroprudential policies since the global financial crisis have been central to safeguarding financial stability. Despite the increasing use of multiple policy instruments, a detailed understanding of interactions among them is still needed to assess how instrument combinations can enhance the effectiveness of macroprudential action. This paper proposes a conceptual framework for informing the choice of combinations of macroprudential instruments, looking at the role of micro and macroeconomic transmission channels, interactions across policy objectives, the importance of country specificities and linkages with other macroeconomic or supervisory policies. It also reviews considerations related to circumvention, leakages, time of activation and communication of policies, all of which may affect the desirability of different combinations of macroprudential instruments. The paper also discusses a possible operational use of combinations of macroprudential instruments to address selected risks and provides a rich analysis of instrument interactions within the categories of borrower-based and, respectively, capital-based measures. The paper concludes that the combinations of capital and borrower-based instruments ensures a comprehensive coverage of different systemic risks and entail important synergies.
- JEL Code:
- G21,G28
- 14 March 2023
-
Weekly financial statementAnnexes
- 14 March 2023
-
Weekly financial statement - Commentary
- 14 March 2023
-
Digital Euro Investigation Phase - Scheme Rulebook Development Group documents
- 14 March 2023
-
Digital Euro Investigation Phase - Scheme Rulebook Development Group documents
- 13 March 2023
- 10 March 2023
-
SpeechDetails
- Subtitle:
- Presentation by Fabio Panetta, Member of the Executive Board of the ECB, at the European Banking Federation Executive Committee Meeting
- 9 March 2023
-
The ECB BlogDetails
- Subtitle:
- Europe must speed up its green and digital transition. For that, we need to complete the Capital Markets Union to provide effective financing. This is the plea made by the five Presidents of the ECB, EIB, European Council, European Commission and Eurogroup in a joint post.
- 8 March 2023
-
SpeechDetails
- Subtitle:
- Speech by Christine Lagarde, President of the ECB, at the International Women’s Day event organised by World Trade Organization (WTO) in Geneva
- 8 March 2023
-
Working Paper Series - Issue No. 2794Details
- Abstract:
- Is digitalisation a massive gamechanger which will deliver huge gains in productivity, or is it more of a sideshow with only limited impacts? We use a large balance sheet panel dataset comprising more than 19 million European firm-level observations to empirically investigate the impact of digitalisation on productivity growth via various previously unexplored chan-nels and mechanisms. Our results suggest that for two otherwise identical firms, the firm that exhibits on average a higher share of investment in digital technologies will exhibit a faster rate of TFP growth, but not all firms and sectors experience significant productivity gains from digitalisation. Digitalisation does not seem to have relatively stronger impacts on the productivity of frontier firms compared to laggards, nor does it help to turn laggards into frontier firms. Overall, firms should not regard digital investment as a ‘one-size-fits-all’ strategy to improve their productivity. Digital technologies are a gamechanger for some firms. But they seem more like a sideshow for most firms, who attempt to be increasingly digital but are not able to adequately reap its productivity gains.
- JEL Code:
- D22,D24,D25,O33
- 8 March 2023
-
SpeechDetails
- Subtitle:
- Introductory remarks by Fabio Panetta, Member of the Executive Board of the ECB, at the meeting of the Euro Cyber Resilience Board for pan-European Financial Infrastructures
- 7 March 2023
-
Weekly financial statementAnnexes
- 7 March 2023
-
Weekly financial statement - Commentary
- 7 March 2023
-
Disaggregated financial statement
- 7 March 2023
-
Working Paper Series - Issue No. 2793Details
- Abstract:
- Climate change and the public policies to arrest it are and will continue reshaping the global economy. This Discussion Paper draws on economic research to identify some key medium- and long-run economic implications of these developments. It explores implications for growth, innovation, inflation, financial markets, fiscal policy, and several socio-economic outcomes. The main message that emerges is that climate change will cause income divergence across individuals, sectors, and regions, adjustment in energy markets, increased inflation variability, financial markets stress, intensified innovation, increased migration, and rising public debt. These challenges appear manageable for EU member states, especially under an early and orderly transition scenario. At the same time, the direction, scope, and speed of economic transformation is subject to large uncertainty due to two separate factors: the wide range of climate scenarios for a given trajectory of greenhouse gas emissions and the exact policy path governments choose, especially in the context of the ongoing Russian aggression in Ukraine.
- JEL Code:
- D6,E3,F2,G2,O1,Q5
- Network:
- Discussion papers
- 7 March 2023
-
Discussion Paper Series - Issue No. 22Details
- Abstract:
- Climate change and the public policies to arrest it are and will continue reshaping the global economy. This Discussion Paper draws on economic research to identify some key medium- and long-run economic implications of these developments. It explores implications for growth, innovation, inflation, financial markets, fiscal policy, and several socio-economic outcomes. The main message that emerges is that climate change will cause income divergence across individuals, sectors, and regions, adjustment in energy markets, increased inflation variability, financial markets stress, intensified innovation, increased migration, and rising public debt. These challenges appear manageable for EU member states, especially under an early and orderly transition scenario. At the same time, the direction, scope, and speed of economic transformation is subject to large uncertainty due to two separate factors: the wide range of climate scenarios for a given trajectory of greenhouse gas emissions and the exact policy path governments choose, especially in the context of the ongoing Russian aggression in Ukraine.
- JEL Code:
- D6,E3,F2,G2,O1,Q5
- 7 March 2023
-
The ECB BlogDetails
- JEL Code:
- E31
- Subtitle:
- Croatian consumers have expressed concerns about price increases related to the euro changeover. Preliminary evidence presented in this ECB blog post shows that the changeover from kuna to euro has so far had relatively little impact on Croatian consumer prices and price perceptions.
- 7 March 2023
-
Press release
- 7 March 2023
-
Consumer Expectation Survey
- 7 March 2023
-
Consumer Expectation Survey
- 7 March 2023
-
Consumer Expectation Survey
- 7 March 2023
-
Consumer Expectation Survey
- 6 March 2023
-
SpeechDetails
- Subtitle:
- Lecture by Philip R. Lane, Member of the Executive Board of the ECB, Trinity College Dublin
- 6 March 2023
-
Euro area insurance corporations statisticsAnnexes
- 6 March 2023
-
Euro area insurance corporations statistics
- 5 March 2023
-
InterviewDetails
- Subtitle:
- Interview with Christine Lagarde, President of the ECB, conducted by Adolfo Lorente, from El Correo
- 3 March 2023
-
MFI interest rate statistics
- 2 March 2023
-
Working Paper Series - Issue No. 2792Details
- Abstract:
- IFRS 9 substantially affects the financial sector by changing the impairment methodology for credit losses. This paper analyzes the implications of the change from IAS 39 to IFRS 9 in the context of bank resilience. We shed light on two effects. First, the “cliff-effect”, which refers to sudden increases in impairments. It occurred under IAS 39, as credit losses were only recognized with hindsight, and thus late and abruptly. IFRS 9 was designed to mitigate this issue through a staging approach, which gradually recognizes expected credit losses (ECL). These anticipated impairments, however, constitute a significant “front-loading”, which is the second effect we investigate. The earlier recognition of losses may adversely impact bank resilience through lower capital levels. In the absence of archival data of IFRS 9 and their potential biases due to the COVID-19 pandemic, we use the European bank stress test results as a natural experiment, in which all banks are subject to the same regulations and exogenous shocks. This characteristic allows us to isolate otherwise immeasurable effects and empirically investigate, whether the conjunction of both effects constitutes a net benefit to banks’ resilience. Furthermore, the vigorousness of procyclicality under IFRS 9 can be compared to IAS 39 by contrasting a hypothetical baseline and an adverse scenario.
- JEL Code:
- E58,G21,G28,M41,M48
- 2 March 2023
-
SpeechDetails
- Subtitle:
- Speech and Slides by Isabel Schnabel at Money Market Contact Group (MMCG)
Annexes- 2 March 2023
- 2 March 2023
-
Monetary policy accountRelated
- 2 February 2023
-
Monetary policy decision
- 2 March 2023
- 1 March 2023
-
InterviewDetails
- Subtitle:
- Interview with Philip R. Lane, Member of the Executive Board of the ECB, conducted by Nicholas Owen
- 1 March 2023
-
The ECB BlogDetails
- JEL Code:
- J21,J61,J82
- Subtitle:
- Millions of Ukrainians were displaced by Russia’s unjustified war and have found refuge in the euro area. Many refugees want to work and thus increase the euro area labour force. This ECB Blog post updates previous calculations by considering novel information on the whereabouts and demographics of Ukrainian refugees.
Related- 24 February 2023
- 28 February 2023
-
Weekly financial statementAnnexes
- 28 February 2023
-
Weekly financial statement - Commentary
- 28 February 2023
-
InterviewDetails
- Subtitle:
- Interview with Philip R. Lane, Member of the Executive Board of the ECB, conducted on Friday, 24 February 2023 by Balázs Korányi and Frank Siebelt
- 27 February 2023
-
SpeechDetails
- Subtitle:
- Presentation by Philip R. Lane, Member of the Executive Board of the ECB, at the Lecture organised by the Consulate General of Ireland and Goethe Universität in Frankfurt
- 27 February 2023
-
Working Paper Series - Issue No. 2791Details
- Abstract:
- We propose to treat survey-based density expectations as compositional data when testing either for heterogeneity in density forecasts across different groups of agents or for changes over time. Monte Carlo simulations show that the proposed test has more power relative to both a bootstrap approach based on the KLIC and an approach which involves multiple testing for differences of individual parts of the density. In addition, the test is computaionally much faster than the KLIC-based one, which relies on simulations, and allows for comparisons across multiple groups. Using density expectations from the ECB Survey of Professional Forecasters and the U.S. Survey of Consumer Expectations, we show the usefulness of the test in detecting possible changes in density expectations over time and across different types of forecasters.
- JEL Code:
- C12,D84,E27
- 27 February 2023
-
Monetary developments in the euro areaAnnexes
- 27 February 2023
-
Monetary developments in the euro area
- 27 February 2023
-
Survey of Monetary Analysts
- 27 February 2023
-
InterviewDetails
- Subtitle:
- Interview with Christine Lagarde, President of the ECB, conducted M.C. Govardhana Rangan on 24 February 2023
- 25 February 2023
-
InterviewDetails
- Subtitle:
- Interview with Christine Lagarde, President of the ECB, conducted by Petri Sajari
- 24 February 2023
-
Governing Council decisions - Other decisions
- 24 February 2023
-
The ECB BlogDetails
- JEL Code:
- E30,E31
- Subtitle:
- Russia’s unjustified war against Ukraine and its people is first and foremost a human tragedy. It is also having an economic impact on Ukraine and beyond. This ECB Blog post – the first in a series about the economic effects of the war – focuses on inflation in the euro area.
Related- 1 March 2023
- 24 February 2023
-
Research Bulletin - Issue No. 104Details
- Abstract:
- In this article we exploit the richness and flexible design of the CES to explore in detail recent changes in consumers’ medium-term inflation expectations. The data suggest that over the course of 2022 these expectations became less well anchored around the ECB’s 2% inflation target. By taking the necessary actions and actively communicating how monetary policy is contributing to stabilising future inflation, the ECB can help strengthen public trust and prevent recent price and cost shocks from having longer-lasting inflationary effects.
- JEL Code:
- C83,D84,E31,E37,E52,E58
- 24 February 2023
-
Digital Euro GovernanceAnnexes
- 24 February 2023
-
Digital Euro Governance
- 24 February 2023
-
Digital Euro Governance
- 24 February 2023
-
Digital Euro Governance
- 24 February 2023
-
Digital Euro Governance
- 24 February 2023
-
Digital Euro Governance
- 24 February 2023
-
Digital Euro Governance
- 22 March 2023
-
Digital Euro Governance
- 23 February 2023
-
Annual consolidated balance sheet of the Eurosystem - Issue No. 2022Annexes
- 22 June 2023
-
Annual consolidated balance sheet of the Eurosystem
Related- 23 February 2023
-
Press release
- 23 February 2023
-
Annual Accounts
- 23 February 2023
-
Press releaseRelated
- 23 February 2023
-
Annual Accounts
- 23 February 2023
-
Annual consolidated balance sheet of the Eurosystem - Issue No. 2022
- 23 February 2023
-
Annual AccountsRelated
- 23 February 2023
-
Press release
- 25 May 2023
-
Annual Report
- 23 February 2023
-
Annual consolidated balance sheet of the Eurosystem - Issue No. 2022
- 23 February 2023
-
Working Paper Series - Issue No. 2790Details
- Abstract:
- This paper investigates to what extent the introduction of negative monetary policy rates altered competitive behaviour in the euro area banking sector. Specifically, it analyses the effect that negative policy rates had on euro area banks’ market power in comparison to banks that have not been subject to negative rates. The analysis, considering a sample of 4,223 banks over the period 2011–2018 and relying on a difference-in-differences methodology, finds that negative monetary policy rates led to an increase in euro area banks’ market power. Furthermore, it shows that, during the negative interest rate policy period, change in banks’ competitive behaviour affected the bank lending channel and discouraged banks from taking excessive risks.
- JEL Code:
- E44,E52,E58,G20,G21
- 23 February 2023
-
Working Paper Series - Issue No. 2789Details
- Abstract:
- The acceleration of house price growth amidst falling interest rates to record-low levels across euro area countries between 2015 and 2021 has sparked renewed interest in the link between the two variables. Asset-pricing theory suggests that real house prices respond to changes in real interest rates in a non-linear fashion. This non-linearity should be especially pronounced at very low real interest rates. Most existing empirical studies estimate models with a con-stant semi-elasticity, thereby ruling out by design the potential non-linearities between house prices and interest rates. To address this issue, we estimate a panel model for the euro area countries with a constant interest rate elasticity (as opposed to a constant semi-elasticity), which is consistent with asset pricing theory. Our empirical results suggest that, in a low interest rate environment such as the period between 2015 and 2021, non-linearities in the house price response to interest rate changes are important: an increase of real interest rates from ultra-low levels could lead to downward pressure on real house prices three to eight times higher than the literature suggests.
- JEL Code:
- E43,E52,R21,R30
- 22 February 2023
-
Digital Euro GovernanceAnnexes
- 22 February 2023
-
Digital Euro Governance
- 22 February 2023
-
Digital Euro Governance
- 22 February 2023
-
Digital Euro Governance
- 22 February 2023
-
Digital Euro Governance
- 22 February 2023
-
Digital Euro Governance
- 22 February 2023
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Digital Euro Governance
- 24 March 2023
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Digital Euro Governance
- 21 February 2023
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Weekly financial statementAnnexes
- 21 February 2023
-
Weekly financial statement - Commentary
- 21 February 2023
-
Working Paper Series - Issue No. 2788Details
- Abstract:
- Empirical analyses find that the long-run natural rate, or the real rate prevailing over a long-run equilibrium where nominal rigidities are absent, is subject to permanent shocks. How should monetary policy react to such shocks? Our paper answers this question in a variant of the new Keynesian model. Because of the zero lower bound (ZLB) on nominal interest rates, the mere possibility of future movements towards zero of the long-run natural rate imparts a downward bias on inflation expectations. To offset this bias, a central bank optimizing under commitment should not only rely on forward guidance at the ZLB, as recommended by the existing literature, but also adopt an expansionary bias away from the ZLB. The neutral rate, i.e. the real policy rate consistent with stable inflation in the long-run, should fall more than one-to-one with the long-run natural rate, as the latter approaches zero. This is the case both under optimal commitment policy, and if optimal policy is implemented through a price level targeting rule.
- JEL Code:
- C63,E31,E52
- 20 February 2023
-
Working Paper Series - Issue No. 2787Details
- Abstract:
- This paper evaluates the impact of the March 2020 European Central Bank recommenda-tion that banks do not pay dividends or buy back shares on their market values. It documents a causal negative impact on bank share prices of around 7% during the two weeks following its announcement. The recommendation affected the market values of banks directly, by delaying investor cash flows and indirectly, by increasing the uncertainty about future distri-butions and thus banks’ equity risk premia. The impact differed across banks depending on their distribution plans and risk-adjusted profitability. Our analysis highlights the impor-tance of managing perceptions about dividend uncertainty through credible communication about the expected duration, frequency and severity of dividend restrictions to limit their unintended side effects.
- JEL Code:
- G12,G21,G28,G35
- 17 February 2023
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Press release
- 17 February 2023
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InterviewDetails
- Subtitle:
- Interview with Isabel Schnabel, Member of the Executive Board of the ECB, conducted by Jana Randow and Alexander Weber on 15 February 2023
- 17 February 2023
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Euro area financial vehicle corporation statisticsAnnexes
- 17 February 2023
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Euro area financial vehicle corporation statistics
- 17 February 2023
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Euro area investment fund statisticsAnnexes
- 17 February 2023
-
Balance of payments (monthly)
- 16 February 2023
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SpeechDetails
- Subtitle:
- Dow Lecture by Philip R. Lane, Member of the Executive Board of the ECB, at the National Institute of Economic and Social Research
- 16 February 2023
-
Working Paper Series - Issue No. 2786Details
- Abstract:
- Bayesian decisions are observationally identical to decisions with judgment. Decisions with judgment test whether a judgmental decision is optimal and, in case of rejection, move to the closest boundary of the confidence interval, for a given confidence level. The resulting decisions condition on sample realizations, which are used to construct the confidence interval itself. Bayesian decisions condition on sample realizations twice, with the tested hypothesis and with the choice of the confidence level. The second conditioning reveals that Bayesian decision makers have an ex ante confidence level equal to one, which is equivalent to assuming an uncertainty neutral behavior. Robust Bayesian decisions are characterized by an ex ante confidence level strictly lower than one and are therefore uncertainty averse.
- JEL Code:
- C1,C11,C12,C13
- 16 February 2023
-
Working Paper Series - Issue No. 2785Details
- Abstract:
- We show that the announcement of the ECB’s Strategy Review and the revision of its inflation target in summer 2021 went largely unnoticed by the wider public. Although it is hard to reach out to this group, we find evidence that communicating key elements of the strategy can enhance the perceived credibility that price stability will be maintained in the medium-term. Randomised information treatments reveal that providing additional explanations about monetary policy’s stabilising role has the strongest positive impact on credibility, boosting credibility also among the less financially literate and generating more persistent credibility gains, even after inflation increased.
- JEL Code:
- E52,E58,E31
- 16 February 2023
-
SpeechDetails
- Subtitle:
- Speech by Fabio Panetta, Member of the Executive Board of the ECB, at an event organised by the Centre for European Reform, the Delegation of the European Union to the United Kingdom and the ECB Representative Office in London
Annexes- 16 February 2023
- 16 February 2023
-
Economic Bulletin
- 16 February 2023
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Economic Bulletin - BoxEconomic Bulletin Issue 1, 2023Details
- Abstract:
- Using firm-level data from the Survey on the Access to Finance of Enterprises (SAFE), this box investigates whether bond-issuing firms substitute bond issuance with bank loans as bond market conditions deteriorate, and whether this affects bank lending conditions for SMEs that do not rely on bond financing. In the latest round of the SAFE, euro area firms reported a widening of their corporate bond financing gap (the difference between the change in the need for and the change in the availability of corporate bond financing). As bond issuers are typically large firms that rely on multiple sources of finance, their substitution of bond issuance with bank loans could lead to a tightening of bank lending conditions for smaller firms. This box finds evidence that bond-issuing firms substitute bond issuance with bank loans when bond market conditions deteriorate. In addition, there is some indication that as corporate bond financing gaps widen, bank lending conditions deteriorate for SMEs that do not use bond financing.
- JEL Code:
- D22,E44,E52,E58
- 16 February 2023
-
Economic Bulletin - BoxEconomic Bulletin Issue 1, 2023Details
- Abstract:
- This box updates the analysis published in April 2022 that reviewed the Eurosystem and ECB staff inflation projections published since the start of the coronavirus (COVID-19) pandemic. The accuracy of short-term inflation projections made by Eurosystem and ECB staff deteriorated after Russia invaded Ukraine in February 2022. However, projection accuracy improved in the final quarter of 2022. Errors related to conditioning assumptions for energy commodity prices and the pass-through of those prices to consumer prices (complicated by the uncertain impact of fiscal policy measures) continue to account for a significant albeit declining share of the total staff inflation projection errors. The remaining errors are likely to relate to the impact of global supply chain bottlenecks and reopening effects following the pandemic. In addition, the exceptional size of commodity price shocks may have led to a much faster pass-through, while the high inflationary environment may have enabled easier repricing and required faster resetting of prices than had been observed in the past. In comparative terms, other international institutions and private forecasters have under-predicted short-term euro area inflation to a similar extent. Eurosystem and ECB staff are continuing to re-evaluate their models to further improve the accuracy of their projection techniques and to provide additional analyses that can inform projections in times of high uncertainty.
- JEL Code:
- J2
- 15 February 2023
-
SpeechDetails
- Subtitle:
- Speech by Christine Lagarde, President of the ECB, at the plenary session of the European Parliament
- 15 February 2023
-
Working Paper Series - Issue No. 2784Leakages from macroprudential regulations: the case of household-specific tools and corporate creditDetails
- Abstract:
- Sector-specific macroprudential regulations can increase the riskiness of credit to other sec-tors. First, using cross-country bank-level data we find that after a tightening of household-specific macroprudential policy during a credit expansion, banks with larger portfolios of residential mortgages increase their corporate lending by more than banks with smaller mortgage portfolios. Second, we compute three country-level measures of the riskiness of corporate credit allocation based on firm-level data. Consistently across the measures, an unexpected tightening of household-specific macroprudential tools during a credit expansion is followed by an increase in riskiness of corporate credit. These effects are quantitatively meaningful: the riskiness of corporate credit increases by around 10 percent of the historical standard deviation following an unexpected policy tightening. Further evidence from bank lending standards surveys suggests that the leakage effects are stronger for larger firms com-pared to SMEs, consistent with recent evidence on the use of personal real estate as loan collateral by small firms.
- JEL Code:
- G21,G28,G38
- 15 February 2023
-
Working Paper Series - Issue No. 2783Details
- Abstract:
- We develop a model of financial intermediation with remunerated Central Bank Digital Currency (CBDC) as consumers’ alternative to bank deposits and an endogenous risk of bank runs. Echoing widespread concerns, higher CBDC remuneration raises bank fragility by increasing consumers’ withdrawal incentives. On the other hand, it also induces banks to offer more attractive deposit contracts in order to retain funding, thereby reducing fragility. This results in a U-shaped relationship between bank fragility and CBDC remuneration. We evaluate policy proposals aimed at mitigating the financial-stability risks of CBDC, such as holding limits and contingent CBDC remuneration.
- JEL Code:
- D82,G01,G21
- 15 February 2023
-
The ECB BlogDetails
- JEL Code:
- H54
- Subtitle:
- Do the NextGenerationEU funds hold up to their promise to make Europe’s economies stronger and more resilient? Two years into the lifetime of the programme, this ECB Blog post assesses where governments stand and what risks there are for implementation.
- 15 February 2023
-
Economic Bulletin - BoxEconomic Bulletin Issue 1, 2023Details
- Abstract:
- In line with the ECB’s comprehensive action plan to incorporate climate change considerations into its policy framework, technical assumptions on carbon pricing have been introduced in the Eurosystem/ECB staff macroeconomic projections, along with a regular evaluation of the impact of climate-related fiscal policies on the projections baseline. This box evaluates the impact of green fiscal measures on GDP growth and inflation and discusses potential effects and risks to the outlook posed by the EU Emissions Trading System (ETS) and non-fiscal climate-related measures. The overall impact of green measures on euro area real GDP growth is expected to be very small until 2025, and their impact on inflation is limited but increases slightly over time. Over the period 2022-25, fiscal measures that are detrimental to the green transition outweigh green measures. Changes to the EU ETS under the “Fit for 55” package, and the sustained shift towards renewable energy sources implied by regulation, could pose both upside and downside risks to the inflation outlook, especially from 2025 onwards.
- JEL Code:
- Q58,O44,E32
- 15 February 2023
-
Economic Bulletin - BoxEconomic Bulletin Issue 1, 2023Details
- Abstract:
- Work from home (WFH) patterns have changed substantially following the onset of the coronavirus (COVID-19) pandemic and point to a persistently increased preference for remote work among workers. According to the ECB Consumer Expectations Survey (CES), over 60% of workers had never worked from home before the pandemic, a share that then dropped to below 40% in the months following its onset. Around two-thirds of workers would still like to work remotely at least one day a week after the COVID-19 pandemic ends. Workers’ WFH preferences are broadly aligned with the preferences they perceive their employers to have. However, if workers have WFH preferences that exceed those they perceive their employers to have, they are more likely to change jobs. Two key factors affecting workers’ WFH preferences are their occupations and commute times.
- JEL Code:
- J2
- 15 February 2023
-
Digital Euro Investigation Phase - Scheme Rulebook Development Group documents
- 15 February 2023
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Digital Euro Investigation Phase - Scheme Rulebook Development Group documents
- 14 February 2023
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Weekly financial statementAnnexes
- 14 February 2023
-
Weekly financial statement - Commentary
- 14 February 2023
-
Working Paper Series - Issue No. 2782Details
- Abstract:
- Loan guarantees represent a form of government intervention to support bank lending. However, their use raises concerns as to their effect on bank risk-taking incentives. In a model of •nancial fragility that incorporates bank capital and a bank incentive problem, we show that loan guarantees reduce depositor runs and improve bank underwriting standards, except for the most poorly capitalized banks. We highlight a novel feedback effect between banks•' underwriting choices and depositors' •run decisions, and show that the effect of loan guarantees on banks' incentives is different from that of other types of guarantees, such as deposit insurance.
- JEL Code:
- G21,G28
- 14 February 2023
-
Working Paper Series - Issue No. 2781Details
- Abstract:
- How is the price level determined in a monetary union when the common monetary policy pegs the nominal interest rate? How are the price levels in the member countries determined? We extend the fiscal theory of the price level to the case of a heterogenous monetary union. Price level determinacy follows if fiscal policy at the level of the union as a whole is active. Different combinations of national fiscal policies and a common fiscal policy with “Eurobonds” amount to active fiscal policy for the union, but can have very different implications for the effects of fiscal and monetary policy. We propose how to coordinate the national policies and the common policy for union-wide policy to be active.
- JEL Code:
- E31,E63,F45
- 14 February 2023
-
Economic Bulletin - BoxEconomic Bulletin Issue 1, 2023Details
- Abstract:
- The box investigates the role of energy prices in the dynamics of euro area industrial production and goods import volumes since autumn 2021, when gas supplies from Russia to the European Union (EU) were curtailed significantly. Despite the sharp rise in energy prices and the uncertainty generated by Russia’s invasion of Ukraine, euro area industrial production has fluctuated without exhibiting a clear trend, while import volumes of goods excluding energy have risen steadily. Several factors, such as adverse energy supply shocks in combination with the easing of supply bottlenecks and a recovery in demand, are behind these developments. There are signs that cheaper imports, particularly of intermediate goods, have acted as substitutes for domestic manufacturing production in more energy-intensive sectors.
- JEL Code:
- E31,E21
- 14 February 2023
-
Economic Bulletin - BoxEconomic Bulletin Issue 1, 2023Details
- Abstract:
- As a result of the Russian curtailment of gas deliveries, the EU gas market has become increasingly interlinked with the Asian market for liquified natural gas (LNG). This box analyses global risks to the EU gas market in 2023 by focusing on two supply risks: (i) the ongoing risk to the remaining gas imports from Russia, and (ii) a rebound in Chinese energy demand resulting from the easing of coronavirus (COVID-19) lockdown measures. If the EU decides to extend its current gas saving plan to the end of 2023, it could avoid facing a supply deficit, as long as Russia continues to deliver gas at the current low levels and Chinese gas demand remains low. However, if Russia cuts the remaining gas supplies to the EU and Chinese gas demand rebounds to 2021 levels, the EU could face a supply deficit of around 9% of projected gas consumption, and if one of the supply risks materialises, the EU’s supply deficit would be 2-4%. While there are ways of plugging this gap, EU gas security would become vulnerable to other less foreseeable shocks. For example, severe weather or a prolonged cold spell could deplete gas storage levels faster than expected and worsen the 2023 gas outlook.
- JEL Code:
- E21,E32
- 13 February 2023
-
Working Paper Series - Issue No. 2780Details
- Abstract:
- We introduce a new dynamic clustering method for multivariate panel data char-acterized by time-variation in cluster locations and shapes, cluster compositions, and, possibly, the number of clusters. To avoid overly frequent cluster switching (flickering), we extend standard cross-sectional clustering techniques with a penalty that shrinks observations towards the current center of their previous cluster as-signment. This links consecutive cross-sections in the panel together, substantially reduces flickering, and enhances the economic interpretability of the outcome. We choose the shrinkage parameter in a data-driven way and study its misclassification properties theoretically as well as in several challenging simulation settings. The method is illustrated using a multivariate panel of four accounting ratios for 28 large European insurance firms between 2010 and 2020.
- JEL Code:
- C33,C38,G22
- 13 February 2023
-
Working Paper Series - Issue No. 2779Details
- Abstract:
- We use a DSGE model to study the effectiveness of green-asset purchases by the central bank (Green QE), along the transition to a carbon-free economy driven by an emission tax, abstracting from price stability considerations. We find that Green QE helps to further reduce emissions, especially in the early stage of the transition. We find that a crucial parameter to determine the effectiveness of Green QE is the elasticity of substitution between the brown and the green good: the higher the elasticity the stronger the impact of the policy on emissions.
- JEL Code:
- E52,E58,Q54
- 13 February 2023
-
Economic Bulletin - ArticleEconomic Bulletin Issue 2, 2023Details
- Abstract:
- This article assesses the relation between fiscal policy and inflation, with a focus on the euro area and the period 2022-25 (corresponding to the horizon of the December 2022 Eurosystem staff macroeconomic projections for the euro area). Overall, the article concludes that, even without the discretionary policy response to the high energy prices and inflation (assessed at close to 2% of GDP over the 2022-23 period), the euro area budget balance could be negatively affected by the current high inflation beyond the short term. This is primarily explained by the nature of the inflation shock, which has a substantial external, energy-driven component, and its large size. Such factors lead to more limited gains on the revenue side of the budget, which in turn can easily be outweighed in the following years by extra spending pressures. In terms of the euro area debt-to-GDP ratio, the analysis shows that a negative impact on economic activity from an adverse supply shock, given the monetary policy reaction, may outweigh the positive initial impact of higher inflation through the denominator effect. The discretionary fiscal policy measures that have so far been adopted to shield the economy from the impact of high inflation in turn lower the inflationary pressures over the 2022-23 period, with a broad estimated reversal of the effect afterwards. The degree to which these fiscal measures will influence price dynamics is highly uncertain.
- JEL Code:
- E31,E37,E62,E63
- 10 February 2023
-
InterviewDetails
- Subtitle:
- Interview with Isabel Schnabel, Member of the Executive Board of the ECB, conducted and published on 10 February 2023
- 10 February 2023
- 10 February 2023
- 9 February 2023
- 9 February 2023
-
Working Paper Series - Issue No. 2778Details
- Abstract:
- We study how monetary policy affects local market competition in a union of countries ex-periencing different economic conditions: the euro area. We find that when monetary conditions tighten (loosen), from the point of view of an individual economy, market concentration increases (declines). This effect is more pronounced when interest rates have been low-for-long, and it is stronger in sectors that are relatively more sensitive to changes in financing conditions. The underlying mechanism is a decline (increase) in short-term debt and investment by smaller and medium-size firms, relative to large firms, following monetary policy tightening (easing).
- JEL Code:
- E2,G1,G12
- Network:
- Challenges for Monetary Policy Transmission in a Changing World Network (ChaMP)
- 8 February 2023
-
InterviewDetails
- Subtitle:
- Interview with Luis de Guindos, Vice-President of the ECB, conducted by Markus Zydra and Meike Schreiber
- 8 February 2023
-
Statistics Paper Series - Issue No. 42Details
- Abstract:
- To carry out the analysis required for monetary policy, the European Central Bank (ECB) and the European System of Central Banks (ESCB) need comprehensive and reliable government finance statistics. The focus of government finance statistics has traditionally been the government as a whole (consolidated), with a particular emphasis on central government. In recent years, however, the focus on subnational government finance statistics has increased, with stories of misreporting by a number of such governments hitting the news. Moreover, subnational governments are the layer of government to which people have the closest connection through their use of services that are either subsidised or directly provided by these bodies. These two aspects prompted the authors to take a closer look at the subnational government finance statistics of all European Union (EU) countries during the period 2000-19 (before, during and after the financial crisis). Data for the year 2020 are not included in this paper to prevent the analysis being skewed by the impact of government coronavirus measures.
- JEL Code:
- H11,H2,H41,H7
- 8 February 2023
-
Working Paper Series - Issue No. 2777Details
- Abstract:
- We revisit the so-called ”secular international problem”, whereby the adjustment of current account imbalances purportedly falls entirely on the shoulders of deficit countries. We introduce a stylised model to rationalise an asymmetric counter-cyclical policy reaction that is stronger for deficit countries. When considering large current account adjustments (both deficits and surpluses) in advanced and emerging economies, we find surprisingly little evidence of greater policy activism in deficit countries. However, large surplus adjustments are less frequent. Moreover, when we look at current account (terms of trade) shocks we do find some evidence of asymmetry in the sense that fiscal policy is tightened only in reaction to shocks leading to a larger deficit position. Finally, being in a banking crisis leads to a more counter-cyclical response to negative current account shocks, partly mitigated by a stronger NFA position and a higher quality of institutions for emerging economies.
- JEL Code:
- F32,F41
- 8 February 2023
-
Working Paper Series - Issue No. 2776Details
- Abstract:
- (Why) do prices and inflation rates differ within the euro area? We study the relevance of a national border for grocery prices in the otherwise homogenous and highly integrated border region of Austria and Germany. Using transaction data on prices and quantities from a large household panel, we compare the prices of identical products within a narrow band along the border. We find large assortment and price differences between these two regions. Even within multinational retail chains the prices of identical products on the two sides of the border differ on average by about 21%. These price differences are not very persistent indicating little arbitrage gain from undifferentiated cross-border shopping. Ensuing product-level inflation rates differ for only half of the chains. The results highlight the importance of the history-dependent evolution of distribution networks and of the structure of the sales organization as a driver of price and inflation heterogeneity.
- JEL Code:
- D12,E31,D43,F15,F4
- Network:
- Price-setting Microdata Analysis Network (PRISMA)
- 7 February 2023
-
SpeechDetails
- Subtitle:
- Speech by Isabel Schnabel, member of the Executive Board of the ECB, at Webinar Finanzwende
- 7 February 2023
- 7 February 2023
-
Weekly financial statementAnnexes
- 7 February 2023
-
Weekly financial statement - Commentary
- 7 February 2023
- 7 February 2023
-
Working Paper Series - Issue No. 2775Details
- Abstract:
- We study the effects of negative interest rate policies (NIRP) on the transmission of monetary policy through cross-border lending. Using bank-level data from international financial centres – the United Kingdom, Hong Kong and Ireland – we examine how NIRP in the economies where banks have their headquarters influences cross-border lending from financial-centre affiliates. We find that NIRP impairs the bank-lending channel for cross-border lending to non-bank sectors, especially for those banks that have only a weak deposit base in IFCs – and are thus relatively more exposed to NIRP in their headquarters. Using euro-area data, including bank-level data from France, we find that NIRP does not influence overall cross-border lending from banks’ headquarters’ economies, but NIRP does impair lending to financial sectors based in IFCs. This impairment is stronger for banks with a large deposit base in headquarter economies exposed to NIRP.
- JEL Code:
- E52,F34,F36,F42,G21
- 7 February 2023
-
Working Paper Series - Issue No. 2774Details
- Abstract:
- This paper provides a comprehensive empirical analysis of the role of discretionary fiscal policy for inflation differentials across the 19 euro area countries over the period 1999-2019. The results confirm existing (older) literature that it is difficult to find robust evidence of the fiscal policy stance or impulse impacting directly on inflation differentials. We do find, however, support for an indirect effect of discretionary fiscal policy on inflation differentials working through the output gap channel. There is also some evidence that fiscal policy may be especially potent in influencing inflation differentials – with fiscal tightening cooling (and fiscal expansion increasing) inflation pressures – when the economy is above its potential. Finally, going from the overall fiscal stance or impulse to individual fiscal instruments, we find that value added tax (VAT) rate changes and public wage growth are statistically significant determinants of inflation differentials in our sample.
- JEL Code:
- E31,E62,E63,F45
- 7 February 2023
-
Press release
- 7 February 2023
-
Consumer Expectation Survey
- 7 February 2023
-
Consumer Expectation Survey
- 7 February 2023
-
Consumer Expectation Survey
- 7 February 2023
-
Consumer Expectation Survey
- 6 February 2023
-
Working Paper Series - Issue No. 2773Details
- Abstract:
- How much does quality adjustment matter in measuring consumer price inflation? To address this question, we use different sources of micro and macro price data for Germany and the euro area. For Germany, we find that quality adjustment applies to a large range of goods and services but, on average, price adjustments due to quality changes reduce headline inflation only by 0.06 percentage points, which is balanced out by an increase due to quantity adjustment (e.g. a smaller package size) of the same amount. For the euro area, we assess the impact of heterogeneous quality adjustment methods by deriving the distribution of member states’ cumulative inflation rates for typical quality-adjusted products. Our macro-based estimate makes up to ± 0.2 percentage points for headline HICP inflation and ranges between± 0.1 and 0.3 percentage points for core inflation, when controlling for income differentials between member states. [...]
- JEL Code:
- E31,C43
- Network:
- Price-setting Microdata Analysis Network (PRISMA)
- 6 February 2023
-
Working Paper Series - Issue No. 2772Details
- Abstract:
- Empirical research suggests that lower interest rates induce banks to take higher risks. We assess analytically what this risk-taking channel implies for optimal monetary policy in a tractable New Keynesian model. We show that this channel creates a motive for the planner to stabilize the real rate. This objective conflicts with the standard inflation stabilization objective. Optimal policy thus tolerates more inflation volatility. An inertial Taylor-type reaction function becomes optimal. We then quantify the significance of the risk-taking channel for monetary policy in an estimated medium-scale extension of the model. Ignoring the channel when designing policy entails non-negligible welfare costs (0.7%lifetime consumption equivalent).
- JEL Code:
- E44,E52
- 6 February 2023
-
The ECB BlogDetails
- JEL Code:
- E42
- Subtitle:
- The ECB has asked people in the euro area how they pay and which payment methods they prefer. The ECB Blog discusses our survey findings and what they mean for the future of cash and digital means of payment.
- 6 February 2023
-
Survey of Monetary Analysts - Aggregate results
- 3 February 2023
- 3 February 2023
- 3 February 2023
- 3 February 2023
-
Working Paper Series - Issue No. 2771Details
- Abstract:
- This paper investigates both the magnitude and the drivers of bank window dressing behaviour in euro-denominated repo markets. Using a confidential transaction-level data set, our analysis illustrates that banks engineer an economically sizeable contraction in their repo transactions around regulatory reporting dates. We establish a causal link between these reductions and banks’ incentives to window dress and document the role of the leverage ratio and the G-SIB framework as the most relevant drivers of window dressing behaviour. Our findings suggest that regulatory action is warranted to limit banks’ ability to window dress.
- JEL Code:
- C23,G14,G18,G21,G28
- 3 February 2023
-
Working Paper Series - Issue No. 2770Details
- Abstract:
- How do financial markets acquire information about upcoming monetary policy decisions, beyond their reaction to central bank signals? This paper hypothesises that sharing information among investors can improve expectations, especially in the presence of disagreement or uncertainty about the economy. To test this hypothesis, the paper studies monetary policy-related content on Twitter during the “quiet period” before European Central Bank announcements, when policymakers refrain from public statements related to monetary policy. Conditional on large disagreement about the economic outlook, higher Twitter traffic is associated with smaller monetary policy surprises, suggesting that exchanging private signals among investors can help improve expectations.
- JEL Code:
- D83,E52,E58,G14
- 3 February 2023
-
Press releaseRelated
- 3 February 2023
-
Survey of Professional Forecasters
- 3 February 2023
-
Survey of Professional ForecastersAnnexes
- 3 February 2023
Related- 3 February 2023
- 3 February 2023
-
Economic Bulletin - BoxEconomic Bulletin Issue 1, 2023Details
- Abstract:
- This box summarises the findings of recent contacts between ECB staff and representatives of 73 leading non-financial companies operating in the euro area. According to these exchanges, which took place between 4 and 12 January 2023, aggregate activity had broadly stagnated or contracted mildly in the fourth quarter of 2022, but with notable differences across sectors. The short-term outlook for activity remained subdued with much uncertainty, but there was increased hope of a pick-up in 2023. Selling prices continued to increase in aggregate, but at a moderating pace and with more variability across sectors and a less certain outlook. Wage growth was now the predominant cost concern, although wage expectations remained broadly unchanged from the previous survey round. Despite greater wage cost pressure and very high uncertainty regarding the future path of energy prices, most contacts expected lower price growth in 2023 than in 2022.
- JEL Code:
- E2,E3,L2
- 2 February 2023
-
PodcastRelated
- 2 February 2023
-
Monetary policy statement
- 2 February 2023
-
Press releaseRelated
- 2 February 2023
-
Monetary policy decision
- 2 February 2023
-
Combined monetary policy decisions and statementRelated
- 2 February 2023
-
Monetary policy statement
- 2 February 2023
-
Monetary policy decision
- 2 February 2023
-
Monetary policy statementDetails
- Subtitle:
- Christine Lagarde, President of the ECB, Luis de Guindos, Vice-President of the ECB, Frankfurt am Main, 2 February 2023
Related- 2 February 2023
-
Combined monetary policy decisions and statement
- 2 February 2023
- 2 February 2023
-
Monetary policy decisionRelated
- 2 February 2023
-
Combined monetary policy decisions and statement
- 2 February 2023
- 2 March 2023
-
Monetary policy account
- 2 February 2023
-
MFI interest rate statistics
- 1 February 2023
-
€STR Transparency on errors
- 31 January 2023
-
Weekly financial statementAnnexes
- 31 January 2023
-
Weekly financial statement - Commentary
- 31 January 2023
-
Euro area bank lending survey - Issue No. 2022Annexes
- 2 May 2023
-
Euro area bank lending survey - Annex
Related- 31 January 2023
-
Press release
- 31 January 2023
-
Press releaseRelated
- 31 January 2023
-
Euro area bank lending survey - Issue No. 2022
- 30 January 2023
- 30 January 2023
-
Press release
- 27 January 2023
-
Euro area economic and financial developments by institutional sector (full)
- 27 January 2023
-
Monetary developments in the euro areaAnnexes
- 26 January 2023
-
Monetary developments in the euro area
- 27 January 2023
-
The ECB BlogDetails
- Subtitle:
- The ECB’s main building in Frankfurt stands on a site linked to the atrocities of the Holocaust. On International Holocaust Remembrance Day, we affirm that tyranny and state injustice must never again prevail. Building European unity is a cornerstone of this commitment.
- 25 January 2023
-
Working Paper Series - Issue No. 2769Details
- Abstract:
- Differences in labour market institutions and regulations between countries of the monetary union can cause divergent responses even to a common shock. We augment a multi-country model of the euro area with search and matching framework that differs across Ricardian and hand-to-mouth households. In this setting, we investigate the implications of cross-country heterogeneity in labour market institutions for the conduct of monetary policy in a monetary union. We compute responses to an expansionary demand shock and to an inflationary supply shock under the Taylor rule, asymmetric unemployment targeting, and average inflation targeting. For each rule we distinguish between cases with zero weight on the unemployment gap and a negative response to rising unemployment. Across all rules, responding to unemployment leads to lower losses of employment and higher inflation. Responding to unemployment reduces cross-country differences within the monetary union and the differences in consumption levels of rich and poor households.
- JEL Code:
- E24,E32,E43,E52,F45
- 25 January 2023
-
Working Paper Series - Issue No. 2768Details
- Abstract:
- This paper compares within-sample and out-of-sample fit of a DSGE model with rational expectations to a model with adaptive learning. The Galí, Smets and Wouters model is the chosen laboratory using quarterly real-time euro area data vintages, covering 2001Q1–2019Q4. The adaptive learning model obtains better within-sample fit for all vintages used for estimation in the forecast exercise and for the full sample. However, the rational expectations model typically predicts real GDP growth better as well as jointly with inflation. For the marginal inflation forecasts, the same holds for the inner quarters of the forecast horizon, while the adaptive learning model predicts better for the outer quarters.
- JEL Code:
- C11,C32,C52,C53,E37
- 24 January 2023
-
InterviewDetails
- Subtitle:
- Interview with Fabio Panetta, Member of the Executive Board of the ECB, conducted by Andreas Kröner, Jan Mallien and Frank Wiebe
- 24 January 2023
-
Weekly financial statementAnnexes
- 24 January 2023
-
Weekly financial statement - Commentary
- 24 January 2023
-
Working Paper Series - Issue No. 2767Details
- Abstract:
- We develop a measure of overall financial risk in China by applying machine learning techniques to textual data. A pre-defined set of relevant newspaper articles is first selected using a specific constellation of risk-related keywords. Then, we employ topical modelling based on an unsupervised machine learning algorithm to decompose financial risk into its thematic drivers. The resulting aggregated indicator can identify major episodes of overall heightened financial risks in China, which cannot be consistently captured using financial data. Finally, a structural VAR framework is employed to show that shocks to the financial risk measure have a significant impact on macroeconomic and financial variables in China and abroad.
- JEL Code:
- C32,C65,E32,F44,G15
- 24 January 2023
-
Working Paper Series - Issue No. 2766Details
- Abstract:
- This paper provides an analysis of the impact of the COVID-19 pandemic on exporting firms, fo-cusing on the role of supply bottlenecks. Based on monthly transaction-level data for the universe of French exporters over the period January 2020-December 2021, we find that participation in global value chains increased firms’ vulnerability to the COVID-19 shock, in terms of both export perfor-mance and probability of survival in the export market, the negative impact of supply disruptions being higher for relatively more downstream firms. At the same time, the results suggest that export-ing firms benefited from sourcing of core inputs from different countries, supporting the hypothesis that diversification in global value chains fosters supply-chain resilience.
- JEL Code:
- D22,F14,F61
- 24 January 2023
- 24 January 2023
-
T2S Harmonisation progress report
- 24 January 2023
-
Other publicationAnnexes
- 24 January 2023
-
Other publication
- 23 January 2023
-
SpeechDetails
- Subtitle:
- Speech by Christine Lagarde, President of the ECB, at the Deutsche Börse Annual Reception in Eschborn
- 23 January 2023
-
SpeechDetails
- Subtitle:
- Introductory statement by Fabio Panetta, Member of the Executive Board of the ECB, at the Committee on Economic and Monetary Affairs of the European Parliament
Related- 21 December 2022
-
Digital Euro Governance
- 20 December 2022
- 23 January 2023
-
Working Paper Series - Issue No. 2765Details
- Abstract:
- Economic literature suggests that banks change their dividend payouts for three main reasons. They may be willing to signal good future profitability to shareholders to address information asymmetry, or use dividends to mitigate the agency costs, or could come under pressure from prudential supervisors and regulators to retain earnings. The COVID-19 pandemic led to introduction of sector-wide recommendation by regulators to suspend dividend payouts in view of prevailing large uncertainty. Using a panel data approach for two samples of listed and unlisted European banks, this paper provides evidence that, over a decade and a half preceding the pandemic, bank dividend payouts were adjusted in line with the three motivations found in the literature. The results are robust to selection of alternative variables representing these motivations. Banks are found not to discount expectations about future economic conditions or their own profitability when making payouts. Simulations shown in the paper suggest that, in the absence of supervisory recommendations, banks would likely have reduced the payouts only slightly in the first year of the pandemic.
- JEL Code:
- G21,G35
- 23 January 2023
-
Working Paper Series - Issue No. 2764Details
- Abstract:
- The EU is revising its emissions trading system (ETS) and plans to impose a carbon border adjustment mechanism (CBAM) on imports. We evaluate the efficacy of the ETS retrospectively and its anti-competitive effects. We find that the ETS contributed to cut greenhouse gas (GHG) emissions in the EU by 2-2.5 percentage points per year; pricier emissions and more stringent caps accelerated the EU greening process. However, some carbon leakages occurred as declining emissions in regulated industries within the EU were counterbalanced by an intensification elsewhere. Moreover, it burdened companies in regulated industries. For a comparable rise in the emission intensity of production, gross output of companies located in the EU drops more than output of companies outside the EU. In addition, the choice of purchasing high-emission inputs from within the EU translates into a competitive disadvantage for companies located within the EU. The large drop in F-type output when emissions intensity rises might signal their enhanced ability to relocate the production of high-carbon footprints intermediates to non-regulated regions. Outsourcing helps dodging the EU green regulation and the strategy becomes increasingly appealing as the sectoral coverage of the ETS is extended. A careful joint design of the CBAM and the ETS becomes thus crucial to avoid that applying the CBAM to a restricted list of imports while expanding the ETS coverage puts the EU at greater risk of carbon leakages without concretely reducing global emissions.
- JEL Code:
- Q52,Q58
- 19 January 2023
-
Monetary policy accountRelated
- 15 December 2022
-
Monetary policy decision
- 19 January 2023
-
Balance of payments (monthly)
- 18 January 2023
-
The ECB BlogDetails
- JEL Code:
- E22,F34,G31,G32
- Subtitle:
- Hit by multiple shocks, the corporate sector has increased its debt over recent years. The ECB Blog shows that strained balance sheets could significantly depress firms’ investment in the coming years with negative implications for innovation and growth.
- 17 January 2023
-
Weekly financial statementAnnexes
- 17 January 2023
-
Weekly financial statement - Commentary
- 17 January 2023
-
InterviewDetails
- Subtitle:
- Interview with Philip R. Lane, Member of the Executive Board of the ECB, conducted by Martin Wolf on 12 January 2023
- 16 January 2023
-
Digital Euro Governance
- 16 January 2023
-
Survey of Monetary Analysts
- 16 January 2023
-
Research Bulletin - Issue No. 103Details
- Abstract:
- A safe asset is of high credit quality, retains its value in bad times and is traded in liquid markets. We show that bonds issued by the European Union (EU) are widely considered to be of high credit quality, and that their yield spread over German Bunds remained contained during the 2020 COVID-19 pandemic recession. Recent issuances under the EU’s SURE and NGEU initiatives helped improve EU bonds' market liquidity from previously low levels, also reducing liquidity risk premia. Eurosystem purchases and holdings of EU bonds did not impair market liquidity. Currently, one obstacle to EU bonds achieving a genuine euro-denominated safe asset status, approaching that of Bunds, lies in the one-off, time-limited nature of the EU’s COVID-19-related policy responses.
- JEL Code:
- G12,H63
- 13 January 2023
-
Survey on credit terms and conditions in euro-denominated securities financing and OTC derivatives marketsAnnexes
- 13 January 2023
- 13 January 2023
-
Other publication
- 13 January 2023
-
Press releaseRelated
- 13 January 2023
- 13 January 2023
-
Digital Euro Investigation Phase documentAnnexes
- 13 January 2023
-
Digital Euro Investigation Phase document
- 5 February 2023
-
Digital Euro Investigation Phase document
- 12 January 2023
-
Economic Bulletin - Issue No. 8
- 12 January 2023
-
Press release
- 12 January 2023
-
Consumer Expectation Survey
- 12 January 2023
-
Consumer Expectation Survey
- 12 January 2023
-
Consumer Expectation Survey
- 12 January 2023
-
Consumer Expectation Survey
- 12 January 2023
-
Economic Bulletin - BoxEconomic Bulletin Issue 8, 2022Details
- Abstract:
- This box examines the information that the euro area bank lending survey (BLS) provides on future growth in loans to firms and households for house purchase in the euro area. The survey has proved to be invaluable for assessing the passthrough of monetary policy to borrowers via banks, for obtaining early information on turning points in lending conditions, and for understanding changes in loan demand and lending conditions during exceptional periods, such as the COVID-19 (coronavirus) pandemic and the Russian war in Ukraine. First, simple cross-correlations reveal a strong relation between BLS indicators and actual loan growth several quarters ahead. Second, BLS indicators help improve loan forecasts. In terms of loans to firms, the credit standards and loan demand reported in the BLS provide additional information that can be used when forecasting lending, while for housing loans, forecasts are improved by taking into account reported demand in particular. Finally, bank-level data confirm that BLS responses also reveal information on loan developments at the individual bank level. Overall, recent developments regarding BLS credit standards and loan demand point to a deceleration of growth in loans to firms and households in the coming quarters.
- JEL Code:
- E4,E44,E5,E52,G21
- 12 January 2023
-
Economic Bulletin - BoxEconomic Bulletin Issue 8, 2022Details
- Abstract:
- This box describes the liquidity conditions and the ECB’s monetary policy operations during the fifth and sixth maintenance periods of 2022, from 27 July to 1 November.
- JEL Code:
- E40,E52,E58
- 12 January 2023
-
Economic Bulletin - BoxEconomic Bulletin Issue 8, 2022Details
- Abstract:
- This box looks at the link between firms’ financing conditions and the euro area business cycle. For information on financing conditions of firms, the box uses results from the Survey on the Access to Finance of Enterprises (SAFE). Monetary policy is shown to affect changes in firms’ financing gaps – the difference between the change in demand for and the change in the availability of external financing – as well as their expectations about future availability of finance. At the current juncture, firms report increasing financing gaps and a deterioration in their expectations about the availability of finance in the period ahead. Such responses from firms are associated with stronger concerns about finance at the firm level. Moreover, financing conditions matter for the aggregate business cycle: increasing financing gaps and lower expected availability of finance foreshadow lower GDP growth.
- JEL Code:
- D22,E32,E44,E52
- 12 January 2023
-
Economic Bulletin - BoxEconomic Bulletin Issue 8, 2022Details
- Abstract:
- On 1 January 2023 Croatia adopted the euro and became the 20th member of the euro area. The Croatian economy is expected to benefit from the elimination of currency risk, as well as lower transaction and borrowing costs. After its accession to the EU in 2013, Croatia made significant progress in addressing macroeconomic imbalances and achieving convergence towards the euro area. It now needs to continue with those reform efforts in order to fully reap the benefits of the euro and to allow adjustment mechanisms to operate efficiently within the enlarged currency area.
- JEL Code:
- E42,F15,F45,O47
- 12 January 2023
-
Economic Bulletin - ArticleEconomic Bulletin Issue 8, 2022Details
- Abstract:
- This article provides an initial review of the ECB’s pandemic emergency purchase programme (PEPP), with a focus on its objectives, implementation, and effectiveness. The ECB launched the PEPP in March 2020 in response to the extraordinary economic and financial shock brought about by the coronavirus (COVID-19) pandemic. Implementation of the programme was flexible, spreading purchases over time, across asset classes and among jurisdictions. The PEPP was instrumental in supporting market functioning and the transmission of the monetary policy stance, and thus in countering pandemic-related risks to price stability.
- JEL Code:
- E52,E58,E65
- 11 January 2023
-
Euro area economic and financial developments by institutional sector (early)
- 11 January 2023
-
Balance of payments (quarterly)
- 11 January 2023
-
Economic Bulletin - BoxEconomic Bulletin Issue 8, 2022Details
- Abstract:
- This box examines the impact of the recent increase in energy prices on real consumer spending in the euro area. The empirical framework relies on a structural vector autoregression (SVAR) model and identifies adverse energy supply shocks that lead to a deterioration in the terms of trade, as captured by the ratio between the GDP deflator and the private consumption deflator, and a decline in real consumer spending. It finds that energy supply shocks have significantly weighed on total private consumption in recent quarters, with durable goods consumption being particularly affected.
- JEL Code:
- E31,E21
- 10 January 2023
-
Weekly financial statementAnnexes
- 10 January 2023
-
Weekly financial statement - Commentary
- 10 January 2023
-
Weekly financial statementAnnexes
- 10 January 2023
-
Weekly financial statement - Commentary
- 10 January 2023
-
SpeechDetails
- Subtitle:
- Speech by Isabel Schnabel, Member of the Executive Board of the ECB, at the International Symposium on Central Bank Independence, Sveriges Riksbank, Stockholm
Annexes- 10 January 2023
-
Speech
- 10 January 2023
-
Economic Bulletin - BoxEconomic Bulletin Issue 8, 2022Details
- Abstract:
- This box discusses fiscal policy orientation in 2023 in the context of the ongoing European Semester.
- JEL Code:
- E62,H6
- 10 January 2023
-
Economic Bulletin - BoxEconomic Bulletin Issue 8, 2022Details
- Abstract:
- Headline inflation has increased sharply in the euro area and in the United States since the start of 2021. But there are major differences between inflation developments in these two economies. In particular, energy inflation has been much higher in the euro area – leading to higher headline inflation than in the United States in recent months. As the euro area is significantly more dependent on energy imports than the United States, the rise in energy prices constitutes a strong adverse terms-of-trade shock to euro area income. Amid the resulting relatively slower recovery from the pandemic in the euro area, the contribution of demand to core inflation has increased more gradually and later in the euro area than in the United States. In addition, the short-term outlook for economic growth is weaker in the euro area than in the United States and the US labour market is tighter, implying a relatively smaller impetus from economic activity and the labour market to inflation in the euro area. Looking ahead, professional forecasters expect inflation to be somewhat more persistent in the United States than in the euro area.
- JEL Code:
- E31,E21,F4,N10,J3
- 9 January 2023
-
Economic Bulletin - BoxEconomic Bulletin Issue 8, 2022Details
- Abstract:
- This box examines cross-country developments in compensation per employee since the start of the coronavirus (COVID-19) pandemic. The pandemic has strongly affected wage developments across euro area countries, reflecting standard cyclical and structural determinants as well as novel factors, such as differences in the size and impact of the shock or the specificities of national job retention schemes.
- JEL Code:
- E24,J21
- 9 January 2023
-
Economic Bulletin - ArticleEconomic Bulletin Issue 8, 2022Details
- Abstract:
- This article discusses wage developments and the main factors that have influenced them since the start of the pandemic. First, it reviews developments in a broad range of wage measures for the euro area and discusses their current usefulness as signals of wage pressures. In this context, it illustrates how the growth of compensation per employee was adjusted for the impact of job retention schemes. Second, the article looks at how wage developments have differed across sectors, reflecting the heterogeneous impact of the pandemic shock. Finally, it discusses the impact of inflation on purchasing power of wage incomes and real wage costs in the euro area by examining developments in real consumer and producer wages for the economy as a whole and in its main sectors.
- JEL Code:
- E24,E31,J30,J31,J38
- 6 January 2023
-
SpeechDetails
- Subtitle:
- Presentation by Philip R. Lane, Member of the Executive Board of the ECB, in panel discussion “Global Economic Outlook” organised by the National Association for Business Economics (NABE) at 2023 ASSA Annual Meeting, New Orleans
- 5 January 2023
-
The ECB BlogDetails
- Subtitle:
- Trading in unbacked digital assets should be treated by regulators like gambling.
Related- 30 November 2022
-
The ECB Blog
- 4 January 2023
-
Weekly financial statementAnnexes
- 4 January 2023
-
Weekly financial statement - Commentary
- 4 January 2023
-
The ECB BlogDetails
- JEL Code:
- E62,H30,E60
- Subtitle:
- Borrowing has become more expensive for governments. But despite rising interest rates, government debt can remain on a sound path. The ECB Blog discusses what constitutes a favourable balance between debt costs and economic growth.
- 4 January 2023
-
MFI interest rate statistics
- 1 January 2023
-
Press release
- 31 December 2022
- 31 December 2022
- 31 December 2022
-
Interview
- 29 December 2022
-
Monetary developments in the euro areaAnnexes
- 29 December 2022
-
Monetary developments in the euro area
- 28 December 2022
-
Weekly financial statementAnnexes
- 28 December 2022
-
Weekly financial statement - Commentary
- 27 December 2022
-
InterviewDetails
- Subtitle:
- Interview with Luis de Guindos, Vice-President of the ECB, conducted on 16 December 2022
- 24 December 2022
-
InterviewDetails
- Subtitle:
- Interview with Isabel Schnabel, Member of the Executive Board of the ECB, conducted by Gerald Braunberger and Christian Siedenbiedel on 16 December 2022
- 22 December 2022
-
Working Paper Series - Issue No. 2763Details
- Abstract:
- We study the role and the interaction of the quality of institutions and of counter-cyclical policies in leaning against the Global Financial Cycle (GFC) in Emerging Economies (EMEs). We show that heteroegeneity in institutional strength is a key determinant of the different effects of the GFC on EME domestic financial conditions. Institutional strength also shapes the response in terms of counter-cyclical policies to sudden changes in global financial conditions as well as the effectiveness of such policies. We illustrate in a simple stylised model that countries may in fact decide to undertake ex ante costly structural reforms that reduce their vulnerability to the GFC or react ex post to the financial s hock. However, we also find that the Covid-19 episode seems to deviate somewhat from the general pattern of EME reaction to shifts in the GFC.
- JEL Code:
- F32,F38,E52,G28
- 22 December 2022
-
€STR Annual Methodology Review
- 22 December 2022
-
InterviewDetails
- Subtitle:
- Interview with Luis de Guindos, Vice-President of the ECB, conducted by Éric Albert on 15 December and published on 22 December
- 21 December 2022
-
Other publication
- 21 December 2022
-
Letters to MEPsRelated
- 21 December 2022
-
Digital Euro Governance
- 21 December 2022
-
Digital Euro Investigation Phase - Progress ReportRelated
- 21 December 2022
- 23 January 2023
- 21 December 2022
-
Working Paper Series - Issue No. 2762Details
- Abstract:
- Using data on syndicated loans, we find that the introduction of a carbon tax is associated with an increase in domestic banks’ lending to coal, oil, and gas companies in foreign countries. This effect is particularly pronounced for banks with large prior fossil-lending exposures, suggesting a role for bank specialization. Lending to private companies in foreign markets increases relatively more, which points to an intensification of banks’ incentives to avoid public scrutiny. We also find that banks reallocate a relatively larger share of their fossil loan portfolio to countries with less strict environ-mental regulation and bank supervision.
- JEL Code:
- F3,G15,G21,H23,Q5
- 21 December 2022
-
Working Paper Series - Issue No. 2761Details
- Abstract:
- We show that a sticky price model featuring firms' heterogeneity in terms of productivity and strategic complementarities in price setting delivers a strictly positive optimal inflation in steady state, differently from standard New Keynesian models. Due to strategic complementarities, more productive firms have higher markups in steady state. This leads to a misallocation distortion, as more productive firms produce too little compared to the social optimum. An increase of steady state inflation curbs the markups, especially those of the more productive firms, hence attenuating the inefficient dispersion of markups. At low levels of inflation, the gains from the reduction in misallocation outweigh the cost of inflation. Heterogeneity in productivity and strategic complementarities in price setting, the key ingredients of our model, imply that also firms' response to shocks is heterogenous: less productive firms transmit cost shocks to prices much more than more productive ones. To provide empirical support to our key mechanism we resort to a quasi-natural experiment occurred in Italy in late 2014, when a cut to social security contributions for all new open-ended contracts was announced. Consistently with our theory, we show that the pass-through of this shock to labour costs was much stronger for less productive firms.
- JEL Code:
- D00,D22,E31
- 21 December 2022
- 20 December 2022
-
Weekly financial statementAnnexes
- 20 December 2022
-
Weekly financial statement - Commentary
- 20 December 2022
-
Press releaseAnnexes
- 20 December 2022
- 20 December 2022
- 20 December 2022
- 20 December 2022
-
Press releaseRelated
- 20 December 2022
- 20 December 2022
-
Balance of payments (monthly)
- 20 December 2022
-
The ECB BlogDetails
- Subtitle:
- The ECB has gauged bank resilience to interest rate shocks under different macroeconomic scenarios. ECB Vice-President Luis de Guindos and Chair of the ECB’s Supervisory Board Andrea Enria walk us through the findings.
- 20 December 2022
-
Working Paper Series - Issue No. 2760Details
- Abstract:
- When the Covid-19 crisis struck, banks using internal-rating based (IRB) models quickly recognized the increase in risk and reduced lending more than banks using a standardized approach. This effect is not driven by borrowers’ quality or by banks in countries with credit booms before the pandemic. The higher risk sensitivity of IRB models does not always result in lower credit provision when risk intensifies. Certain features of the IRB models – the use of a downturn Loss Given Default parameter –can increase banks’ resilience and preserve their intermediation capacity also during downturns. Affected borrowers were not able to fully insulate and decreased corporate investments.
- JEL Code:
- G21,G28
- 20 December 2022
-
Research Bulletin - Issue No. 102Details
- Abstract:
- When the coronavirus (COVID-19) pandemic struck, it was vital for many firms to retain access to funding from banks. In order to calculate their capital requirements, banks measure borrowers’ credit risk using either “their own”, internal ratings-based (IRB) models, or a standardised approach. This analysis examines whether model-based bank regulation constrained lending during the COVID-19 crisis. Results show that banks using their own models extended less credit than banks using a standardised approach. This outcome was not dependent on borrowers’ characteristics, or the credit booms seen in some countries, but is connected to the IRB models that some banks use. Certain features of the models such as the “downturn loss-given default” parameter, which reflects how much money a bank can expect to lose when borrowers default on loans during downturns, are helpful to bolster banks’ resilience and preserve their intermediation capacity during times of economic decline.
- JEL Code:
- G21,G28
- 19 December 2022
-
Legal conference proceedings
- 19 December 2022
-
Working Paper Series - Issue No. 2759Details
- Abstract:
- Does the Federal Reserve follow a communication rule? We propose a simple framework to estimate communication rules, which we conceptualize as a systematic mapping between the Fed’s expectations of macroeconomic variables and the words they use to talk about the economy. Using text analysis and regularized regressions, we find strong evidence for systematic communication rules that vary over time, with changes in the rule often being associated with changes in the economic environment. We also find that shifts in communication rules increase disagreement among professional forecasters and correlate with monetary policy surprise measures. Our method is general and can be applied to investigate systematic communication in a wide variety of settings.
- JEL Code:
- E52,E58,C49
- 19 December 2022
-
Working Paper Series - Issue No. 2758Details
- Abstract:
- We assess the impact on bank bond holdings of regulatory changes in the requirements for bail-inable liabilities designed to facilitate an orderly resolution process, while reducing taxpayers-funded bailouts. Analyzing confidential data on securities holdings by banks, we document that the introduction of the minimum requirements for eligible liabilities (MREL) induced banks to increase their holdings of eligible bank bonds, especially if issued by other banks. The requirement for own funds and eligible liabilities (TLAC) instead raised the incentives for non-issuing banks to invest in eligible subordinated debt issued by global systemically important banks. Finally, we find evidence of increased within-country bank interconnectedness and concentration risks in the banking sector that might potentially introduce frictions in bail-in implementations.
- JEL Code:
- G01,G21,G28
- 19 December 2022
-
Survey of Monetary Analysts - Aggregate results
- 16 December 2022
-
Governing Council decisions - Other decisions
- 16 December 2022
-
Working Paper Series - Issue No. 2757Details
- Abstract:
- This paper develops a framework for the short-term modelling of market risk and shock propagation in the investment funds sector, including bi-layer contagion effects through funds’ cross-holdings and overlapping exposures. Our work tackles in particular climate risk, with a first-of-its-kind dual view of transition and physical climate risk exposures at the fund level. So far, while fund managers communicate more aggressively on their awareness of climate risk, it is still poorly assessed. Our analysis shows that the topology of the fund network matters and that both contagion channels are important in its study. A stress test on the basis of granular short-term transition shocks suggests that the differentiated integration of sustainability information by funds has made network amplification less likely, although first-round losses can be material. On the other hand, there is room for fund managers and regulators to consider physical risk better and mitigate the second round effects it induces, as they are less efficiently absorbed by investment funds. Improving transparency and setting relevant industry standards in this context would help mitigate short-term financial stability risks.
- JEL Code:
- C62,G23,G17,Q54
- 16 December 2022
-
Working Paper Series - Issue No. 2756Details
- Abstract:
- Stricter derivative margin requirements have increased the demand for liquid collateral but euro area investment funds which use derivatives extensively have been reducing their liquid asset holdings. Using transaction-by-transaction derivatives data, we assess whether the current levels of funds’ holdings of cash and other highly liquid assets would be adequate to meet funds’ liquidity needs to cover variation margin calls on derivatives under a range of stress scenarios. The estimates suggest that between 13% and 33% of euro area funds with sizeable derivatives exposures may not have sufficient liquidity buffers to meet the calls. As a result, they are likely to redeem MMF shares, procyclically sell assets and draw on credit lines, thus amplifying the market dynamics under such stress scenarios. Our findings highlight the importance of further work to assess the potential role of macroprudential policies for non-banks, particularly regarding liquidity risk in funds.
- JEL Code:
- C60,G23,G13,G17
- 16 December 2022
-
Letters to MEPsRelated
- 16 December 2022
- 16 December 2022
-
Press releaseRelated
- 16 December 2022
- 15 December 2022
- 15 December 2022
-
PodcastRelated
- 15 December 2022
-
Monetary policy statementDetails
- Subtitle:
- Christine Lagarde, President of the ECB,
Luis de Guindos, Vice-President of the ECB
- 15 December 2022
-
Macroeconomic projections for the euro areaAnnexes
- 15 December 2022
- 29 December 2022
-
Other publication
- 15 December 2022
-
Combined monetary policy decisions and statementRelated
- 15 December 2022
-
Monetary policy statement
- 15 December 2022
-
Monetary policy decision
- 15 December 2022
-
Monetary policy statementDetails
- Subtitle:
- Christine Lagarde, President of the ECB,
Luis de Guindos, Vice-President of the ECB
Related- 15 December 2022
-
Combined monetary policy decisions and statement
- 15 December 2022
- 15 December 2022
-
Monetary policy decisionRelated
- 15 December 2022
-
Combined monetary policy decisions and statement
- 19 January 2023
-
Monetary policy account
- 14 December 2022
-
Euro area pension fund statisticsAnnexes
- 14 December 2022
-
Euro area pension fund statistics
- 13 December 2022
-
Weekly financial statementAnnexes
- 13 December 2022
-
Weekly financial statement - Commentary
- 8 December 2022
-
SpeechDetails
- Subtitle:
- Welcome remarks by Christine Lagarde, President of the ECB and Chair of the European Systemic Risk Board, at the sixth annual conference of the ESRB
- 8 December 2022
-
Digital Euro Investigation Phase documentAnnexes
- 8 December 2022
-
Digital Euro Investigation Phase document
- 8 December 2022
-
Digital Euro Investigation Phase document
- 8 December 2022
-
Digital Euro Investigation Phase document
- 2 January 2023
-
Digital Euro Investigation Phase document
- 7 December 2022
-
SpeechDetails
- Subtitle:
- Keynote speech by Fabio Panetta, Member of the Executive Board of the ECB, at the Insight Summit held at the London Business School
Annexes- 7 December 2022
-
Speech
- 7 December 2022
- 7 December 2022
-
Digital Euro Investigation Phase documentAnnexes
- 7 December 2022
-
Digital Euro Investigation Phase document
- 7 December 2022
-
Digital Euro Investigation Phase document
- 7 December 2022
-
Working Paper Series - Issue No. 2755Details
- Abstract:
- How do real interest rates affect financial fragility? We study this issue in a model in which bank borrowing is subject to rollover risk. A bank’s optimal borrowing trades off the benefit from investing additional funds into profitable assets with the cost of greater risk of a run by bank creditors. Changes in the interest rate affect the price and amount of borrowing, both of which influence bank fragility in opposite directions. Thus, the marginal impact of changes to the interest rate on bank fragility depends on the level of the interest rate. Finally, we derive testable implications that may guide future empirical work.
- JEL Code:
- G01,G21,G28
- 7 December 2022
-
Press release
- 7 December 2022
-
Consumer Expectation Survey
- 7 December 2022
-
Consumer Expectation Survey
- 7 December 2022
-
Consumer Expectation Survey
- 7 December 2022
-
Consumer Expectation Survey
- 7 December 2022
-
SpeechDetails
- Subtitle:
- Presentation by Philip R. Lane, Member of the Executive Board of the ECB, at the Chinese State Administration of Foreign Exchange (SAFE) annual conference on “Global Perspective 2023”
- 6 December 2022
-
Weekly financial statementAnnexes
- 6 December 2022
-
Weekly financial statement - Commentary
- 6 December 2022
-
Working Paper Series - Issue No. 2754Details
- Abstract:
- This paper proposes a new and robust methodology to obtain conditional density forecasts, based on information not contained in an initial econometric model. The methodology allows to condition on expected marginal densities for a selection of variables in the model, rather than just on future paths as it is usually done in the conditional forecasting literature. The proposed algorithm, which is based on tempered importance sampling, adapts the model-based density forecasts to target distributions the researcher has access to. As an example, this paper shows how to implement the algorithm by conditioning the forecasting densities of a BVAR and a DSGE model on information about the marginal densities of future oil prices. The results show that increased asymmetric upside risks to oil prices result in upside risks to inflation as well as higher core-inflation over the considered forecasting horizon. Finally, a real-time forecasting exercise yields that introducing market-based information on the oil price improves inflation and GDP forecasts during crises times such as the COVID pandemic.
- JEL Code:
- C11,C53,E31,E37
- 6 December 2022
-
Digital Euro Investigation Phase documentAnnexes
- 6 December 2022
-
Digital Euro Investigation Phase document
- 6 December 2022
-
Digital Euro Investigation Phase document
- 6 December 2022
-
Digital Euro Investigation Phase document
- 23 January 2023
-
Digital Euro Investigation Phase document
- 6 December 2022
-
Press releaseRelated
- 6 December 2022
-
Survey on the Access to Finance of Enterprises in the euro area
- 6 December 2022
-
Survey on the Access to Finance of Enterprises in the euro areaAnnexes
- 6 December 2022
-
SAFE questionnaire
Related - 6 December 2022
-
InterviewDetails
- Subtitle:
- Interview with Philip R. Lane, Member of the Executive Board of the ECB, conducted by Francesco Ninfole
- 2 December 2022
-
Governing Council decisions - Other decisions
- 2 December 2022
- 2 December 2022
-
MFI interest rate statistics
- 1 December 2022
-
SpeechDetails
- Subtitle:
- Keynote speech by Frank Elderson, Member of the Executive Board of the ECB and Vice-Chair of the Supervisory Board of the ECB, Lustrum Symposium organised by Dutch Financial Law Association
- 1 December 2022
-
SpeechDetails
- Subtitle:
- Presentation by Philip R. Lane, Member of the Executive Board of the ECB, at the Banque de France / EUI conference “Headwinds: upcoming macroeconomic risks”, Florence
- 30 November 2022
-
The ECB BlogDetails
- JEL Code:
- E42
- Subtitle:
- Amid the widespread fallout in crypto markets following the collapse of a major crypto exchange, The ECB Blog takes a look at where we stand with Bitcoin.
Related- 13 July 2022
-
The ECB Blog
- 19 November 2021
-
The ECB Blog
- 14 July 2021
-
The ECB Blog
- 25 March 2021
- 2 December 2020
-
The ECB Blog
- 2 October 2020
-
The ECB Blog
- 5 January 2023
-
The ECB Blog
- 30 November 2022
-
Euro area insurance corporations statisticsAnnexes
- 30 November 2022
-
Euro area insurance corporations statistics
- 29 November 2022
-
Weekly financial statementAnnexes
- 29 November 2022
-
Weekly financial statement - Commentary
- 29 November 2022
-
SpeechDetails
- Subtitle:
- Presentation by Isabel Schnabel, Member of the Executive Board of the ECB, at the IG Metall Economic Talks
- 28 November 2022
-
SpeechDetails
- Subtitle:
- Speech by Christine Lagarde, President of the ECB, at the Hearing of the Committee on Economic and Monetary Affairs of the European Parliament
Annexes- 28 November 2022
- 28 November 2022
-
Speech
- 28 November 2022
-
Monetary developments in the euro areaAnnexes
- 28 November 2022
-
Monetary developments in the euro area
- 28 November 2022
-
Survey of Monetary Analysts
- 25 November 2022
- 25 November 2022
- 25 November 2022
- 25 November 2022
- 25 November 2022
-
The ECB BlogDetails
- JEL Code:
- E31,E37,E52,E58
- Subtitle:
- Identifying the medium-term inflation path in the current environment of high inflation, ongoing energy and pandemic-related shocks and the Russian invasion of Ukraine is a diagnostic challenge. In his ECB Blog post Philip R. Lane, Member of the ECB’s Executive Board, describes some of the key analytical issues involved.
- 24 November 2022
-
SpeechDetails
- Subtitle:
- Keynote speech by Isabel Schnabel, Member of the Executive Board of the ECB, at the Bank of England Watchers’ Conference
Annexes- 24 November 2022
-
Speech
- 24 November 2022
-
Monetary policy accountRelated
- 27 October 2022
-
Monetary policy decision
- 23 November 2022
-
Research Bulletin - Issue No. 101Details
- Abstract:
- Recent empirical findings (Bordalo et al., 2018, 2019; Greenwood et al., 2022) have vindicated the view thatsystemic risk in financial markets is also influenced by cognitive misperceptions about future economicdevelopments in addition to being influenced by financial frictions. Most of the literature on macroprudentialregulation, nonetheless, has omitted those misperceptions and instead has derived policy implicationsassuming rational expectations. In this article (which is based on Camous and Van der Ghote, 2021), weexamine the joint implications of external financing frictions and extrapolative expectations for the stability ofthe financial system and the appropriate conduct of macroprudential regulation. We find that interactionsbetween those two elements exacerbate financial instability relative to the rational benchmark. This calls fortighter macroprudential regulation, even when the regulator is also subject to cognitive misperceptions.Disagreement about the appropriate macroprudential regulation among potential regulators with differingdegrees of misperception is stronger during booms, when risk-taking in financial markets and in realinvestments is more aggressive.
- JEL Code:
- E32,E44,E71
- 22 November 2022
-
Weekly financial statementAnnexes
- 22 November 2022
-
Weekly financial statement - Commentary
- 22 November 2022
-
Balance of payments (monthly)
- 22 November 2022
-
Euro money market statistics
- 21 November 2022
-
InterviewDetails
- Subtitle:
- Interview with Philip R. Lane, Member of the Executive Board of the ECB, conducted by Luke Heighton on 16 November 2022
- 18 November 2022
-
The ECB BlogDetails
- JEL Code:
- Q54,Q52,Q56,Q51
- Subtitle:
- A shared understanding of how climate change affects the economy can be the basis for global action. To help inform and guide policy across the globe central bankers and supervisors have developed climate scenarios. This is the final post in a series on the occasion of COP27.
Related- 15 November 2022
-
The ECB Blog
- 9 November 2022
- 7 November 2022
- 2 November 2022
-
The ECB Blog
- 18 November 2022
-
Euro area financial vehicle corporation statisticsAnnexes
- 18 November 2022
-
Euro area financial vehicle corporation statistics
- 18 November 2022
-
Euro area investment fund statisticsAnnexes
- 18 November 2022
-
Euro area investment fund statistics
- 18 November 2022
-
SpeechDetails
- Subtitle:
- Speech by Christine Lagarde, President of the ECB, at the European Banking Congress
- 17 November 2022
-
Working Paper Series - Issue No. 2753Details
- Abstract:
- We employ interest rates and expected loss probabilities from the 2021 EBA Stress Test dataset and euro area credit registries to examine whether the risk-return relationship holds in banking. After controlling for bank, loan, and debtor characteristics as well as macroeconomic conditions, results indicate that a risk-return relationship in bank lending is present but varies significantly across and within borrower segments. While bank lending rates appear to be quite responsive to risks towards households, results suggest that banks only significantly increase interest rates towards non-financial corporations that reside in the riskiest quantiles of the distribution. This potentially implies the presence of a cross-subsidization effect of credit risk.
- JEL Code:
- E51,E52,E58
- 17 November 2022
-
Working Paper Series - Issue No. 2752Details
- Abstract:
- This paper assesses the role of the housing market in the transmission of conventional and unconventional monetary policy across euro area regions. By exploiting a novel regional dataset on housing-related variables, a structural panel VAR analysis shows that monetary policy propagates effectively to economic activity and house prices, albeit in a heterogeneous fashion across regions. Although the housing channel plays a minor role in the transmission of monetary policy to the economy on average, its importance increases in the case of unconventional monetary policy. We also explore the determinants of the diverse transmission of monetary policy to economic activity across regions, finding a larger impact in areas with lower labour income and more widespread homeownership. An expansionary monetary policy can thus be effective in mitigating regional inequality via its stimulus to the economy.
- JEL Code:
- D31,E32,E44,E52,R31
- 17 November 2022
-
Press release
- 16 November 2022
-
SpeechDetails
- Subtitle:
- Speech by Fabio Panetta, Member of the Executive Board of the ECB, at the Italian Banking Association
- 16 November 2022
-
Working Paper Series - Issue No. 2751Details
- Abstract:
- This paper analyses the implications of corporate indebtedness for investment following large economic shocks. The empirical analysis is based on a large Orbis-iBACH firm-level data set for euro area countries from 2005 to 2018. Our results suggest that investment of high-debt firms is significantly depressed for an extended period in the aftermath of economic crises. In the four years after a negative economic shock, the cumulative loss of capital of high-debt firms is around 15% higher than that of firms with lower debt burdens. The negative impact of high debt on investment is most evident for firms in Southern and Eastern Europe and for micro firms. These findings suggest a potentially significant negative impact of increased corporate indebtedness on investment in the post-COVID-19 recovery.
- JEL Code:
- E22,F34,G31,G32
- 16 November 2022
-
Occasional Paper Series - Issue No. 309Details
- Abstract:
- Climate change poses three specific but interrelated policy challenges: climate change mitigation, climate change adaptation (which includes building up resilience) and managing transition risks. The International Monetary Fund (IMF) is a multilateral institution with global reach and near-universal membership. Therefore, along with other international organisations, it has an important role to play in addressing the policy challenges posed by climate change. This paper discusses the contribution the IMF makes and can make in its three areas of competence: surveillance, lending and technical assistance. The paper concludes that the IMF has significantly increased its engagement in climate change matters in recent years but should further intensify its efforts in ways that are fully consistent with its mandate.
- JEL Code:
- F3,F33,F34,O19,Q5,Q48,Q54
- 16 November 2022
-
Press releaseRelated
- 16 November 2022
-
Financial Stability Review
- 16 November 2022
-
Financial Stability Review - ArticleFinancial Stability Review Issue 2, 2022Details
- Abstract:
- Energy sector firms use energy derivatives under different strategies depending on their main area of activity, business model and exposure to risk in physical markets. The significant volatility and skyrocketing prices seen in energy markets since March 2022 have resulted in large margin calls, generating liquidity risks for derivatives users. Strategies employed by companies to alleviate liquidity stress may lead to an accumulation of credit risk for their lenders or their counterparties in less collateralised segments of the derivatives market. Further price increases would accentuate nascent vulnerabilities, creating additional stress in a concentrated market. These issues underline the need to review margining practices and enhance the liquidity preparedness of all market participants to deal with large margin calls.
- JEL Code:
- Q02,G13,G20
- 16 November 2022
-
Financial Stability ReviewAnnexes
- 16 November 2022
-
Financial Stability Review
Related- 16 November 2022
- 15 November 2022
-
SpeechDetails
- Subtitle:
- Dinner speech by Frank Elderson, Member of the Executive Board of the ECB and Vice-Chair of the Supervisory Board of the ECB, on the occasion of the 25th Euro Finance Week, Deutsche Bundesbank
- 15 November 2022
-
Weekly financial statementAnnexes
- 15 November 2022
-
Weekly financial statement - Commentary
- 15 November 2022
-
Working Paper Series - Issue No. 2750Details
- Abstract:
- The growth in TARGET balances after 2009 has given rise to intense academic and public debate. Our paper offers a systematic exposition of the necessary conditions for TARGET balances to emerge and provides a clear link to monetary policy. We show that large TARGET balances can only arise with excess liquidity. The interpretation of TARGET balances therefore depends on the monetary policy context in which excess liquidity is created. We distinguish three phases of TARGET balances growth and propose some easy-to-derive metrics for policy makers and academics to assess developments in TARGET balances. We develop a comprehensive econometric framework to account for relevant factors driving TARGET balances in the different phases. We find that while financial market stress and economic imbalances were the drivers of TARGET balances during the great financial and sovereign debt crises, the implementation of Eurosystem asset purchases was the driving force since March 2015. As excess liquidity is likely to persist on account of higher demand for central bank reserves compared to the pre-crisis period, TARGET balances have the potential to remain sizeable in the future.
- JEL Code:
- E42,E58,F32
- 15 November 2022
-
Working Paper Series - Issue No. 2749Details
- Abstract:
- We test whether a simple measure of corporate insolvency based on equity return volatility -and denoted as Distance to Insolvency (DI) - delivers better prediction of corporate defaults than the widely-used Expected Default Frequency (EDF) measure computed by Moody’s. We look at the predictive power that current DIs and EDFs have for future defaults, both at a firm-level and at an aggregate level. At the granular level, both DIs and EDFs anticipate corporate defaults, but the DI contains information over and above the EDF, especially at longer forecasting horizons. At an aggregate level the DI shows superior forecasting power compared to the EDF, for horizons between 3 and 12 months. We illustrate the predictive power of the DI measure for the aggregate default rate by examining how corporate defaults would have evolved during the period marked by the spreading of the COVID-19 pandemic if DIs had not increased (so making future defaults less likely) also owing to the Eurosystem’s Public Emergency Purchase Program (PEPP).
- JEL Code:
- C53,C58,G33
- 15 November 2022
-
The ECB BlogDetails
- Subtitle:
- Europe is punching below its weight in the climate-technology competition. The continent needs to facilitate risk capital markets and to invest more in research and development. This is the 4th post in a series of climate-related entries on the occasion of COP27.
Related- 9 November 2022
- 2 November 2022
-
The ECB Blog
- 7 November 2022
- 18 November 2022
- 15 November 2022
-
Financial Stability Review - ArticleFinancial Stability Review Issue 2, 2022Details
- Abstract:
- Digitalisation is transforming the global economy, including by raising productivity and broadening consumer access to information. While these forces are facilitating greater competition, supporting economic growth and lowering prices, the benefits are not without risks – the flip side of digitalisation can be greater vulnerability to cyberattacks. For these to be a source of risk to financial stability, substitutability, risk correlation and interconnectedness are all key dimensions. A cyberattack on a critical infrastructure or an attack on one service that unearths vulnerabilities in another could quickly lead to system-wide stresses. Negative externalities arising from the effectiveness of financial institutions’ management of cyber risk could provide grounds for a public policy response. While the existing macroprudential policy toolkit has limited capacity to address cyber risks, their growing relevance nevertheless calls for macroprudential overseers to anticipate them, assess the capacity of the financial system to absorb them, and to issue risk warnings when warranted. In this vein, econometric evidence suggests that cyberattacks are not random, but are driven by factors such as economic strength, the degree of financial globalisation as well as policy and political uncertainty. This underscores how important it is for authorities to foster the sharing of information and the closing of data gaps on cyberattacks.
- JEL Code:
- D43,D62,D82,E6,G22,G28,H41
- 15 November 2022
-
Financial Stability Review - ArticleFinancial Stability Review Issue 2, 2022Details
- Abstract:
- Since the start of 2022, euro area households have seen the largest increase in consumer prices in decades and the first increase in interest rates in over ten years. For some households – especially those with lower incomes – these shocks could lead to financial distress, including debt defaults. Simulations of the impact of rising consumer prices and interest rates on the near-term financial health of households reveal a more pronounced risk of default in lower income quintiles. For most countries, systemic risk arising from loans originated in lower income quintiles, which represent a lower share of total household debt than loans originated in higher income quintiles, is limited, although it is more significant in some countries. Policy support aimed at dampening the impact of shocks could help to mitigate the risk. Across the euro area, second-round effects stemming from foregone consumption in response to higher financial burdens could weigh on economic performance and further impair banks’ asset quality.
- JEL Code:
- D14,D63,G21,G51
- 14 November 2022
-
SpeechDetails
- Subtitle:
- Speech by Luis de Guindos, Vice-President of the ECB, at the 25th Frankfurt Euro Finance Week
- 14 November 2022
-
Working Paper Series - Issue No. 2748Details
- Abstract:
- We provide new evidence on price rigidity at the product level based on microdata underlying the Swiss consumer price index from 2008 to 2020. We find that the frequency of price changes has increased over the last decade, particularly among products where collection switched to online prices, reflecting the rise of e-commerce. Furthermore, price changes tend to be synchronized within rather than across stores. Time variations in inflation can be attributed mainly to variations in the frequency of both price increases and price decreases. In the first year of the pandemic, the frequency of price adjustments changed little on average, while temporary sales responded countercyclically to the respective demand conditions across sectors.
- JEL Code:
- E31,E5,L11
- Network:
- Price-setting Microdata Analysis Network (PRISMA)
- 14 November 2022
-
Working Paper Series - Issue No. 2747Details
- Abstract:
- Funds with an environmental, social and corporate governance (ESG) mandate have been growing rapidly in recent years and received inflows also during periods of market turmoil, such as March 2020, in contrast to their non-ESG peers. This paper investigates whether investors in ESG funds react differently to past negative performance, making these funds less sensitive to short-term changes in returns. In the absence of an ESG-label, we define an ESG- or Environmentally-focused fund if its name contains relevant words. The results show that ESG/E equity and corporate bond funds exhibit a weaker flow-performance relationship compared to traditional funds in 2016-2020. This finding may reflect the longer-term investment horizon of ESG investors and their expectation of better risk-adjusted performance from ESG funds in the future. We also explore how the results vary across institutional and retail investors and how they depend on the liquidity of funds’ assets and wider market conditions. A weaker flow-performance relationship allows funds to provide a stable source of financing to the green transition and may reduce risks for financial stability, particularly during turmoil episodes.
- JEL Code:
- G11,G23,Q56,C58
- 14 November 2022
-
SpeechDetails
- Subtitle:
- Keynote speech by Fabio Panetta, Member of the Executive Board of the ECB, at the CEPR-EABCN conference on “Finding the Gap: Output Gap Measurement in the Euro Area” held at the European University Institute
Annexes- 14 November 2022
-
Speech
- 11 November 2022
-
SpeechDetails
- Subtitle:
- Presentation by Philip R. Lane, Member of the Executive Board of the ECB, at the 23rd Jacques Polak Annual Research Conference
- 11 November 2022
- 11 November 2022
- 11 November 2022
-
SpeechDetails
- Subtitle:
- Speech by Fabio Panetta, Member of the Executive Board of the ECB, at Istituto per gli Studi di Politica Internazionale (ISPI)[1]
- 11 November 2022
-
Working Paper Series - Issue No. 2746Details
- Abstract:
- Using regionally disaggregated data on economic activity, we show that risk sharing plays a key role in shaping the real effects of monetary policy. With weak risk sharing, monetary policy shocks trigger a strong and durable response in output. With strong risk sharing, the response is attenuated, and output reverts to its initial level over the medium term. The attenuating impact of risk sharing via credit and factor markets concentrates over a two-year horizon, whereas fiscal risk sharing operates over longer horizons. Fiscal risk sharing especially benefits poorer regions by shielding them against persistent output contractions after tightening shocks.
- JEL Code:
- C32,E32,E52
- 11 November 2022
-
Working Paper Series - Issue No. 2745Details
- Abstract:
- This paper studies how banks’ balance sheets and funding costs interact in the transmission of monetary-policy rates to banks’ credit supply to firms. To do so, we use credit registry data from Germany and Portugal together with the European Central Bank’s policy-rate cuts in mid-2014. The pass-through of the rate cuts to banks’ funding costs differs across the euro-area currency union because deposit rates vary in their distance to the zero lower bound (ZLB). When the distance is shorter, banks’ financing constraints matter less for the supply of credit and there is more risk taking. To rationalize these findings, we provide a simple model of an augmented bank balance-sheet channel where in addition to costly external financing, there is screening of borrowers and a ZLB on retail deposit rates. An impaired pass-through of monetary policy to banks’ funding costs reduces their ability to lever up and weakens their lending standards.
- JEL Code:
- E44,E52,E58,E63,F45,G20,G21
- 10 November 2022
-
SpeechDetails
- Subtitle:
- Presentation by Isabel Schnabel, Member of the Executive Board of the ECB, at Banka Slovenije
- 10 November 2022
-
Economic Bulletin
- 10 November 2022
-
Economic Bulletin - BoxEconomic Bulletin Issue 7, 2022Details
- Abstract:
- This box provides an analysis of recent developments in trade and financial linkages between the euro area and Russia as recorded in the euro area balance of payments. The euro area current account balance vis-à-vis Russia turned from a small surplus into a deficit of 0.5% of euro area GDP between the second quarter of 2021 and the second quarter of this year, thus contributing significantly to the reduction in the euro area’s current account surplus over the same period. The bilateral current account deficit vis-à-vis Russia increased on account of the rising value of nominal imports, largely of energy products, and lower exports driven by EU sanctions. Euro area financial exposures to Russia before Russia’s invasion of Ukraine were relatively limited, with foreign direct investment (FDI) being the most important component. Since the start of the war euro area holdings of Russian assets have declined, while liabilities vis-à-vis Russia have increased due to the impact of EU sanctions.
- JEL Code:
- F32,F41
- 10 November 2022
-
Economic Bulletin - BoxEconomic Bulletin Issue 7, 2022Details
- Abstract:
- Carry-over effects describe how much the average growth rate in a given period is affected by developments in the preceding period. The most common application is to quantify how much annual average GDP growth is affected by quarterly developments in the previous year. This box applies this concept to quarterly changes in GDP by interpolating quarterly GDP into monthly observations using monthly indicators. In selecting the appropriate indicator variables, a production perspective is adopted by using industrial production, construction production and an indicator for services production. This sectoral approach is particularly useful in the current environment, given the differences in how sectors are being affected by the sharp and sudden fluctuations in economic conditions.
- JEL Code:
- E00,O10
- 10 November 2022
-
Economic Bulletin - BoxEconomic Bulletin Issue 7, 2022Details
- Abstract:
- Euro area motor vehicle output fell by approximately one-third between June 2018 and July 2022. This can be explained by factors associated with the more stringent emissions tests implemented in the EU, the EU regulation on carbon dioxide emissions, the transition towards electric vehicles, supply chain disruptions, the rise in energy costs and, more recently, the increasing macroeconomic uncertainty related to the war in Ukraine. Euro area car exports also decreased at the same time. The transition to greener motor vehicles and the future evolution of supply bottlenecks are key factors shaping the outlook for euro area car production and exports in the coming years.
- JEL Code:
- E31,E32,F10,L62
- 10 November 2022
-
Digital Euro Investigation Phase documentAnnexes
- 10 November 2022
-
Digital Euro Investigation Phase document
- 10 November 2022
-
Digital Euro Investigation Phase document
- 10 November 2022
-
Digital Euro Investigation Phase document
- 10 November 2022
-
Digital Euro Investigation Phase document
- 10 November 2022
-
Digital Euro Investigation Phase document
- 5 December 2022
-
Digital Euro Investigation Phase document
- 9 November 2022
-
The ECB BlogDetails
- Subtitle:
- We need to intensify the greening of our economies despite the energy crisis. Hastening the process will reduce the costs of transition and help to ensure price stability in the long run. This is the third post in a series of climate-related entries on the occasion of COP27.
Related- 7 November 2022
- 2 November 2022
-
The ECB Blog
- 15 November 2022
-
The ECB Blog
- 18 November 2022
- 9 November 2022
-
SpeechDetails
- Subtitle:
- Panel contribution by Frank Elderson, Member of the Executive Board of the ECB and Vice-Chair of the Supervisory Board of the ECB, at the Euro-Mediterranean Economists Association COP27 side event on “Investing in and financing the acceleration of sustainable development in a net zero scenario” in Sharm El-Sheikh
- 9 November 2022
- 9 November 2022
-
Consumer Expectation Survey
- 9 November 2022
-
Consumer Expectation Survey
- 9 November 2022
-
Consumer Expectation Survey
- 9 November 2022
-
Consumer Expectation Survey
- 9 November 2022
-
Economic Bulletin - BoxEconomic Bulletin Issue 7, 2022Details
- Abstract:
- The strong increase in euro area HICP inflation over the past 18 months has placed additional emphasis on monitoring and understanding the behaviour of consumers’ inflation expectations. Data from the ECB’s Consumer Expectations Survey show that, after HICP inflation rose above 2% in July 2021, consumers’ inflation perceptions and expectations started to move upwards too. However, this rise in shorter-term (one-year ahead) inflation expectations was much more pronounced than that of more medium-term (three-years ahead) expectations and the term structure of consumers’ inflation expectations remained strongly downward sloping. There is some evidence that the responsiveness of inflation expectations to inflation perceptions has increased recently, but it remains noticeably lower for medium-term inflation expectations. Consumers’ uncertainty surrounding their inflation expectations has also grown. Overall, the upward movement in expectations, the increase in uncertainty surrounding them and rising sensitivity of medium-term expectations to perceived current inflation all call for continued close monitoring and analysis.
- JEL Code:
- E31,E52,D84
- 9 November 2022
-
Economic Bulletin - BoxEconomic Bulletin Issue 7, 2022Details
- Abstract:
- This box examines the impact of the recent rise in inflation on low-income households in the euro area. Low-income households face significantly higher effective inflation rates than high-income households, due to a different composition of their consumption basket. Moreover, they are more liquidity-constrained and have less room to buffer sharp increases in their cost of living. Survey-based evidence shows that low-income households perceive the recent government measures aimed at easing the burden of higher energy prices as less adequate than high-income households do. This could suggest that there is potential for government support measures to be more targeted towards low-income households.
- JEL Code:
- E31,E21
- 9 November 2022
-
Digital Euro Investigation Phase documentAnnexes
- 9 November 2022
-
Digital Euro Investigation Phase document
- 9 November 2022
-
Digital Euro Investigation Phase document
- 9 November 2022
-
Digital Euro Investigation Phase document
- 9 November 2022
-
Digital Euro Investigation Phase document
- 9 November 2022
-
Digital Euro Investigation Phase document
- 28 November 2022
-
Digital Euro Investigation Phase document
- 8 November 2022
-
Weekly financial statementAnnexes
- 8 November 2022
-
Weekly financial statement - Commentary
- 8 November 2022
-
Economic Bulletin - ArticleEconomic Bulletin Issue 7, 2022Details
- Abstract:
- This article surveys the literature on consumption risk sharing, focusing on the euro area but also presenting evidence for individual countries, including the United States. The literature finds that risk sharing is weaker in the euro area than between regions or federal states in the individual countries examined. However, our analysis of the response to the coronavirus (COVID-19) crisis indicates that risk sharing in the euro area has been more resilient in this period than it was during the global financial crisis of 2008-10. It suggests that the provision of timely large-scale policy support reduced the risk of cross-border financial flows coming to a sudden halt, thus preventing a severe disruption of private risk sharing. This experience speaks in favour of establishing a common public risk-sharing mechanism in the euro area and completing the banking union and capital markets union. At the same time, the right balance must be found between additional, centralised euro area stabilisation and risk-sharing instruments and credible enforcement of fiscal rules to anchor market expectations of sound public finances.
- JEL Code:
- C23,E62,G11,G15
- 8 November 2022
-
InterviewDetails
- Subtitle:
- Interview with Luis de Guindos, Vice-President of the ECB, conducted by Johanna Treeck on 3 November 2022
- 7 November 2022
-
SpeechDetails
- Subtitle:
- Video address by Christine Lagarde, President of the ECB, to the “High level conference: Towards a legislative framework enabling a digital euro for citizens and businesses”
- 7 November 2022
-
The ECB BlogDetails
- Subtitle:
- If we do not account for the impact of climate change on our economy, we risk missing a crucial part in our work to keep prices stable, argues Christine Lagarde in the ECB Blog. This is the second entry in a series of climate related entries on the occasion of COP27.
Related- 2 November 2022
-
The ECB Blog
- 9 November 2022
- 15 November 2022
-
The ECB Blog
- 18 November 2022
- 7 November 2022
-
Economic Bulletin - BoxEconomic Bulletin Issue 7, 2022Details
- Abstract:
- This Box provides an assessment of trends in European trade in goods and the tourism sector in 2022 using Purchasing Manager Indices (PMI). For goods trade, the analysis shows that bottlenecks in the international supply chain tend to precede upward pressures on import prices for intermediate goods. These pressures are now slowly easing as export demand weakens and supply chains adjust. For services, an earlier surge in bookings in the tourism sector has led to higher prices in that sector. Higher input prices in the tourism and recreation sector, waning pent-up demand for travel, falling real incomes and rising uncertainty may start to dampen demand for European tourism and recreation trade in services in the coming months.
- JEL Code:
- E31,F10,L83
- 4 November 2022
-
SpeechDetails
- Subtitle:
- Lecture by Christine Lagarde, President of the ECB, organised by Eesti Pank and dedicated to Professor Ragnar Nurkse
- 4 November 2022
-
SpeechDetails
- Subtitle:
- Speech by Luis de Guindos, Vice-President of the ECB, at Energy Prospectives event organised by IESE Business School and Naturgy Foundation
- 4 November 2022
-
The ECB BlogDetails
- JEL Code:
- G21
- Subtitle:
- We need strong rules for strong banks. Basel III has what it takes. But planned EU laws might fall behind international standards, write ECB Vice-President Luis de Guindos, ECB Supervisory Chair Andrea Enria and EBA Chairperson José Manuel Campa in a joint Blog post.
- 3 November 2022
- 3 November 2022
-
MFI interest rate statistics
- 3 November 2022
-
SpeechDetails
- Subtitle:
- Keynote speech by Fabio Panetta, Member of the Executive Board of the ECB, at the ECB Money Market Conference
Annexes- 3 November 2022
-
Speech
- 2 November 2022
-
Other publication
- 2 November 2022
-
The ECB BlogDetails
- JEL Code:
- G21
- Subtitle:
- Banks must adapt the way they do business to account for climate-related and environmental risks. The ECB Blog takes a fresh look at their progress and the road ahead. This is the first post in a series of climate-related entries on the occasion of COP27.
Related- 7 November 2022
- 9 November 2022
- 15 November 2022
-
The ECB Blog
- 18 November 2022
- 2 November 2022
-
€STR Transparency on errors
- 1 November 2022
-
Weekly financial statementAnnexes
- 1 November 2022
-
Weekly financial statement - Commentary
- 1 November 2022
-
InterviewDetails
- Subtitle:
- Interview with Christine Lagarde, President of the ECB, conducted by Žanete Hāka
- 31 October 2022
-
SpeechDetails
- Subtitle:
- Presentation by Philip R. Lane, Member of the Executive Board of the ECB, at the Danmarks Nationalbank conference marking the 40th anniversary of the Danish fixed exchange rate regime
- 31 October 2022
-
Press releaseRelated
- 31 October 2022
- 31 October 2022
-
Survey on credit terms and conditions in euro-denominated securities financing and OTC derivatives marketsAnnexes
- 31 October 2022
- 31 October 2022
-
Other publication
- 31 October 2022
-
Working Paper Series - Issue No. 2744Details
- Abstract:
- This survey reviews the literature about the impact of climate change on the natural rate of interest (r*), an important yardstick for monetary policy. Economic and financial developments can lower r* in scenarios with increasing climate-related damages and uncertainty that reduce productivity growth and raise precautionary savings. Instead, in scenarios that assume innovations and investments induced by transition policies, r* could be affected positively. Orderly climate policies have a pivotal role by facilitating the transition to a carbon-neutral economy and supporting a steady investment flow. We discuss the main models used to simulate the effects of climate change on r* and summarize the outcomes. The downward effects of climate change on r* can be substantial, even taking into account the high degree of uncertainty about the outcomes. Moreover, the downward pressure on r* will further challenge monetary policy in the long run, by limiting its policy space.
- JEL Code:
- E52,Q54
- 31 October 2022
-
Working Paper Series - Issue No. 2743Details
- Abstract:
- Since the term was first coined in studies on the 1990s Japanese crisis, the concept of zombification has been investigated and revived repeatedly when concerns arise about credit misallocation and stagnating productivity growth in an economy. The starting point for these studies nearly always involves trying to identify the so-called ‘zombie’ firms. This has led in the past years to a proliferation of different definitions and identification methodologies. We survey the most prominent definitions, discussing advantages and limitations of each. We also undertake a comparison of methodologies on a common dataset for euro area firms from 2004-2019, with the exercise revealing limited overlap and low comparability in the firms identified by several prominent studies. In response, we introduce a formalisation of zombie-classifications which helps to make order in the growing number of variations and identification methodologies. Moreover, this formalisation also helps extending the concept of binary identification to that of fuzzy zombie-identification. In particular, we introduce a general procedure to turn arbitrary binary classifications into fuzzy ones showing it successfully increases consistency between zombie definitions.
- JEL Code:
- L25,D22,D24,C55,O40
- 31 October 2022
-
Survey of Monetary Analysts - Aggregate results
- 31 October 2022
-
Research Bulletin - Issue No. 100Details
- Abstract:
- Central banks around the world are exploring the case for central bank digital currency (CBDC) – essentially a digital version of cash. In this article, we provide an overview of the economics of CBDC (Ahnert et al., 2022a). First, we outline the economic forces that shape the rise of digital money and motivate the current debate. We then look at the implications for monetary policy and financial stability before discussing policy issues and challenges. Finally, we highlight several areas where our understanding of digital money could be improved by further research.
- JEL Code:
- E41,E42,E51,E52,E58,G21
- 28 October 2022
-
Governing Council decisions - Other decisions
- 28 October 2022
-
Euro area economic and financial developments by institutional sector (full)
- 28 October 2022
- 28 October 2022
-
Press releaseRelated
- 28 October 2022
-
Survey of Professional Forecasters
- 28 October 2022
-
Survey of Professional ForecastersAnnexes
- 28 October 2022
Related- 28 October 2022
- 28 October 2022
-
Economic Bulletin - BoxEconomic Bulletin Issue 7, 2022Details
- Abstract:
- This box summarises the main findings from contacts between ECB staff and representatives of 69 leading non-financial companies operating in the euro area. The exchanges mainly took place between 26 September and 6 October 2022. According to these contacts, overall activity had broadly stagnated in the third quarter of this year. Parts of the manufacturing sector had suffered declining sales and production, while in others, production growth was sustained by long order books and easing supply constraints. Services activity was more resilient, supported by digitalisation and tourism. The outlook was for a deterioration in activity in the fourth quarter. Price dynamics remained very buoyant in the third quarter, not least given energy cost pressures. However, an increasing number of firms did say that prices in their sector were either at, or nearing, a peak. Wage pressures continued to build and were increasingly becoming an additional cost concern for many firms.
- JEL Code:
- E2,E3,L2
- 27 October 2022
-
PodcastRelated
- 27 October 2022
-
Monetary policy statementDetails
- Subtitle:
- Christine Lagarde, President of the ECB,
Luis de Guindos, Vice-President of the ECB
- 27 October 2022
-
Press releaseRelated
- 27 October 2022
-
Monetary policy decision
- 27 October 2022
-
Press releaseRelated
- 27 October 2022
-
Monetary policy decision
- 27 October 2022
-
Combined monetary policy decisions and statementRelated
- 27 October 2022
-
Monetary policy statement
- 27 October 2022
-
Monetary policy decision
- 27 October 2022
-
Monetary policy statementDetails
- Subtitle:
- Christine Lagarde, President of the ECB,
Luis de Guindos, Vice-President of the ECB
Related- 27 October 2022
-
Combined monetary policy decisions and statement
- 27 October 2022
- 27 October 2022
-
Monetary policy decisionRelated
- 27 October 2022
-
Combined monetary policy decisions and statement
- 27 October 2022
- 27 October 2022
-
Press release
- 24 November 2022
-
Monetary policy account
- 26 October 2022
-
Monetary developments in the euro areaAnnexes
- 26 October 2022
-
Monetary developments in the euro area
- 25 October 2022
-
Weekly financial statementAnnexes
- 25 October 2022
-
Weekly financial statement - Commentary
- 25 October 2022
-
Press releaseRelated
- 25 October 2022
-
Euro area bank lending survey
- 25 October 2022
-
Euro area bank lending surveyAnnexes
- 25 October 2022
-
Euro area bank lending survey - Annex
Related- 25 October 2022
-
Press release
- 20 October 2022
- 20 October 2022
-
Balance of payments (monthly)
- 19 October 2022
-
Press release
- 19 October 2022
-
The ECB BlogDetails
- JEL Code:
- E52,D22,D31,G01,G21
- Subtitle:
- The ECB Blog investigates how change in the policy rate affects wages very differently depending on characteristics of employees and firms, such as firms’ size and their access to credit. Results show that the effects are symmetric during times of easing and tightening.
Related- 28 July 2022
- 18 October 2022
-
Weekly financial statementAnnexes
- 18 October 2022
-
Weekly financial statement - Commentary
- 18 October 2022
-
Working Paper Series - Issue No. 2742Details
- Abstract:
- The aim of central bank communication is to provide information on monetary policy and the economic outlook in a timely manner to the public. While research on central bank communication and specifically the European Central Bank’s press conference has shown that it has the potential to move markets, in-depth textual analysis of key communication tools creates room for further analysis. Focusing on the press conferences of the ECB, this paper employs structural topic modelling (STM) and finds that topics within the introductory statement and the Q&A are significantly different, with a nearly equal split of topics unique to both parts. The split of topics suggests that the Q&A does not only provide clarification of what has been said in the introductory statement, but also allows journalists to enquire about the discussion within the Governing Council as well as the ECB’s stance on broader economic issues.
- JEL Code:
- E50,E52,E58
- 18 October 2022
- 17 October 2022
-
Digital Euro Investigation Phase document
- 16 October 2022
-
Occasional Paper Series - Issue No. 308Details
- Abstract:
- In this paper we show that allowing deposit guarantee schemes (DGSs) the option of supporting asset and liability transfers in the event of a bank’s insolvency provides important economic benefits. However, only 11 EU Member States have so far included such “alternative measures” in their DGSs’ toolkits. The number of Member States where alternative measures have been actively used is even more limited. Based on our findings, we argue that giving deposit guarantee schemes in the EU the option of using alternative measures would improve the efficiency and effectiveness of the EU banking crisis management framework. It would speed up the handling of smaller banks’ failures while reducing upfront outlays and final costs for deposit guarantee schemes. It would improve the protection of deposits, thereby safeguarding depositor confidence and overall financial stability. It would also allow access to finance to be better preserved and enhance the level playing field for banks and depositors in the EU. We also argue that, apart from the availability of the option in law, the least cost test and the creditor hierarchy determine the de facto availability and potential magnitude of alternative measures. Currently, however, both the least cost test and the creditor hierarchy limit the possibility of supporting asset and liability transfers and may therefore need to be reformed in order for economically efficient results to be achieved.
- JEL Code:
- G01,G21,G28
- 14 October 2022
-
SpeechDetails
- Subtitle:
- Statement by Christine Lagarde, President of the ECB, at the forty-sixth meeting of the International Monetary and Financial Committee
- 14 October 2022
-
InterviewDetails
- Subtitle:
- Interview with Luis de Guindos, Vice-President of the ECB, conducted by Dalius Simenas on 10 October 2022
- 13 October 2022
-
The ECB BlogDetails
- Subtitle:
- Communication is a tool that helps central banks in preserving price stability. But are central banks clear enough and properly understood? On International Plain Language Day, we look at where the ECB stands in its efforts to communicate clearly and accessibly.
Related- 24 August 2022
- 11 October 2022
-
Weekly financial statementAnnexes
- 11 October 2022
-
Weekly financial statement - Commentary
- 11 October 2022
-
SpeechDetails
- Subtitle:
- Speech by Philip R. Lane, Member of the Executive Board of the ECB, at the SUERF, CGEG|COLUMBIA|SIPA, EIB, SOCIÉTÉ GÉNÉRALE conference on “EU and US Perspectives: New Directions for Economic Policy”
- 11 October 2022
-
Occasional Paper Series - Issue No. 307Details
- Abstract:
- Central banks have been discussing the introduction of a retail central bank digital currency (rCBDC) for some time. However, potential obstacles to its adoption by consumers and retailers remain largely unexplored in the academic and policy literature. This paper surveys the key elements involved in the adoption of any new means of payment and discusses failed and ongoing initiatives with public digital money. It concludes that ensuring the desired level of adoption of rCBDCs may impose significant constraints on central bank design choices and policy goals. In fact, in some settings, central banks may find themselves on the horns of a dilemma in seeking to balance the needs to (i) preserve the central bank’s hierarchy of policy goals, (ii) increase the chances of adoption and use of rCBDCs by consumers and retailers, and (iii) avoid any adverse economic effects.
- JEL Code:
- E42,E58,D12
- Network:
- Eurosystem Research Network on Cash (EURECA)
- 10 October 2022
-
Working Paper Series - Issue No. 2741Details
- Abstract:
- Do female directors on banks’ boards influence lending decisions toward less polluting firms? By using granular credit register data matched with information on firm-level greenhouse gas (GHG) emission intensities, we isolate credit supply shifts and find that banks with more gender-diverse boards provide less credit to browner companies. This evidence is robust when we differentiate among types of GHG emissions and control for endogeneity concerns. In addition, we also show that female director-specific characteristics matter for lending behavior to polluting firms as better-educated directors grant lower credit volumes to more polluting firms. Finally, we document that the “greening” effect of the female members in banks’ boardrooms is stronger in countries with more female climate-oriented politicians.
- JEL Code:
- G01,G21,G30,Q50
- 10 October 2022
-
Working Paper Series - Issue No. 2740Details
- Abstract:
- Relying on a perspective borrowed from monetary policy announcements and introducing an econometric twist in the traditional event study analysis, we document the existence of an "event risk transfer", namely a significant credit risk transmission from the sovereign to the corporate sector after a sovereign rating downgrade. We find that after the delivery of the downgrade, corporate CDS spreads rise by 36% per annum and there is a widespread contagion across countries, in particular among those which were most exposed to the sovereign debt crisis. This effect exists on top of the standard relation between sovereign and corporate credit risk.
- JEL Code:
- C21,G12,G14
- 10 October 2022
-
Macroprudential Bulletin - Focus - Issue No. 19Details
- Abstract:
- During the Covid-19 pandemic banks appear to have avoided lending to firms reliant on real estate as collateral. When banks applied downward revaluations to existing real estate collateral they were also less likely to extend loans, particularly to highly leveraged borrowers.
- JEL Code:
- G21,E51,G20
- 10 October 2022
-
Macroprudential Bulletin - Focus - Issue No. 19Details
- Abstract:
- In recent years different macroprudential sectoral risk weight policies have been used in EU countries to address systemic risk in residential real estate markets. This focus shows that the impact of sectoral risk weight floors, add-ons and multipliers is similar to the impact of different sectoral capital and leverage ratio requirement policies.
- JEL Code:
- G21,G38,E58,R38
- 10 October 2022
-
Macroprudential Bulletin - Focus - Issue No. 19Details
- Abstract:
- This focus shows that the interest rate sensitivity of the loan-service-to-income (LSTI) ratio depends on the initial loan-to-income (LTI) ratio, the loan maturity, the interest rate fixation period and the initial interest rate. Based on loan-level simulations for securitised mortgages we find that LSTI increases in response to higher interest rates would be manageable for most loans but pockets of vulnerabilities exist.
- JEL Code:
- G51,E27,E43
- 10 October 2022
-
Macroprudential Bulletin - Focus - Issue No. 19Details
- Abstract:
- This focus proposes a novel framework, a combined price quantity model, which features demand and supply long-run relationships in the housing market, to assess the status of house prices and housing investment relative to equilibrium levels. It shows that in the first quarter of 2022 euro area house prices are estimated to be more than 10% above their equilibrium level, while housing investment is close to its equilibrium.
- JEL Code:
- E22,E31,E32,R30
- 10 October 2022
-
Macroprudential Bulletin - Focus - Issue No. 19Details
- Abstract:
- For a comprehensive RRE risk assessment and to set macroprudential measures targeting RRE, it is important to understand the main drivers of RRE developments and the implications of the various scenarios for the RRE market outlook. In this focus, we propose a model framework based on Bayesian vector autoregressions to shed more light on these issues.
- JEL Code:
- C22,E31,E52,R30
- 10 October 2022
- 10 October 2022
-
Macroprudential Bulletin - Article - Issue No. 19Details
- Abstract:
- This article examines links between Commercial Real Estate (CRE) markets and financial stability. The global financial crisis demonstrated the implications of CRE boom-bust cycles for the stability of many countries’ financial systems. However, CRE risk assessment and macroprudential policy frameworks remain in their infancy due to both the markets’ complexity and the persistence of data gaps. This article takes steps towards closing a number of data gaps by using euro area credit register data to examine the size and nature of links between euro area (EA) banks and CRE markets. Moreover, given that this dataset covers the COVID-19 pandemic crisis period, the operation of these transmission channels can be seen in action, providing insight into how economic theory plays out in practice.
- JEL Code:
- G00,C55,R30
- 10 October 2022
-
Macroprudential Bulletin - Article - Issue No. 19Details
- Abstract:
- Macroprudential measures can effectively support the resilience of households and banks and help tame the build-up of residential real estate (RRE) vulnerabilities. By capping the riskiness of new loans, borrower-based measures contribute to moderating RRE vulnerabilities in the short-term and to increasing the resilience of households over the medium term. By inducing banks to use more equity financing, capital-based measures increase bank resilience in the short and medium term but are unlikely to have a significant dampening effect on RRE vulnerabilities during the upswing phase of a financial cycle. The two categories of measures are mainly complementary and many European countries have therefore implemented them in combination in recent years.
- JEL Code:
- G01,G21,G28,E58,R38
- 10 October 2022
-
Macroprudential Bulletin - Article - Issue No. 19Details
- Abstract:
- Understanding the drivers for residential real estate (RRE) price developments, measuring house price overvaluation, monitoring trends in bank lending and borrowers’ creditworthiness is important for assessing RRE risks and informing policy responses. The ECB uses a comprehensive monitoring framework for regularly assessing RRE vulnerabilities comprising a series of core risk indicators complemented by a broad set of analytical tools. This article describes some of these tools to explain how they are employed in risk analysis.
- JEL Code:
- R31,G01,G21,G51
- 10 October 2022
-
Macroprudential Bulletin - Article - Issue No. 19Details
- Abstract:
- Credit-fuelled real estate booms can pose financial stability risks due to the important direct and indirect links between real estate markets, the economy and the financial system. Different types of macroprudential policy tools can be used to increase resilience to financial stability risks from residential real estate (RRE) markets. Borrower-based tools put a cap on the risk characteristics of new loans, while capital-based tools increase the loss absorption capacity of banks. The ECB, together with the national authorities, has an important role to play in shaping the macroprudential policy response to RRE risks in the euro area.
- JEL Code:
- G01,G21,G38,G51,E58,R38
- 10 October 2022
-
Survey of Monetary Analysts
- 7 October 2022
-
Working Paper Series - Issue No. 2739Details
- Abstract:
- Exchange rate movements affect the economy through changes in net exports, i.e. the trade channel, and through valuation changes in assets and liabilities denominated in foreign currencies, i.e. the financial channel. In this paper, I investigate the macroeconomic and financial effects of U.S. dollar (USD) exchange rate fluctuations in small open economies. Specifically, I examine how the financial channel affects the overall impact of exchange rate fluctuations and assess to what extent foreign currency exposure determines the financial channel’s strength. My empirical analysis indicates that, if foreign currency exposure is high, an appreciation of the domestic currency against the USD is expansionary and loosens financial conditions, which is consistent with the financial channel of exchange rates. Moreover, I estimate a small open economy New Keynesian model, in which a fraction of the domestic banks’ liabilities is denominated in USD. In line with the empirical results, the model shows that an appreciation against the USD can be expansionary depending on the strength of the financial channel, which is linked to the level of foreign currency exposure. Finally, the model indicates that the financial channel amplifies the effects of foreign monetary policy shocks.
- JEL Code:
- E44,F31,F41
- 7 October 2022
-
Working Paper Series - Issue No. 2738Details
- Abstract:
- We develop a dynamic model of a bank which finances its asset portfolio by rolling over short-term deposits with access to LOLR liquidity. Bank faces frictions in equity issuance and loan portfolio adjustments. We calibrate our model with bank’s estimated borrowing capacity at the LOLR and funding profile. We show that rollover of debt combined with access to LOLR results in a wealth transfer from private creditors to equity holders through increased dividend payments in good states, coupled with more risk-taking and defaults in bad states. The effects are stronger for banks with more fragile funding and higher maturity intermediation.
- JEL Code:
- E58,G21,G32,G33,G35
- 7 October 2022
-
Economic Bulletin - BoxEconomic Bulletin Issue 7, 2022Details
- Abstract:
- In this box we decompose components of HICP excluding energy and food inflation into those driven predominantly by demand and those driven predominantly by supply shocks. This approach to monitoring inflation was originally developed for the United States. When adapted to the euro area it reveals that both supply and demand factors have contributed strongly to the increase in HICPX inflation since the second half of 2021. Supply factors were dominant at the beginning of the upturn in inflation in the second half of 2021, but demand factors have gradually increased in importance and contributed to a similar extent as supply factors to HICPX inflation over recent months. In recent months, the main contribution to non-energy industrial goods (NEIG) inflation has come from components predominantly driven by supply shocks, whereas services inflation has stemmed more from components predominantly driven by demand.
- JEL Code:
- E31,E32
- 7 October 2022
-
Press release
- 7 October 2022
-
Consumer Expectation Survey
- 7 October 2022
-
Consumer Expectation Survey
- 7 October 2022
-
Consumer Expectation Survey
- 7 October 2022
-
Consumer Expectation Survey
- 6 October 2022
-
Monetary policy accountRelated
- 8 September 2022
-
Monetary policy decision
- 6 October 2022
-
Other publicationDetails
- Network:
- Eurosystem Research Network on Cash (EURECA)
Annexes- 6 October 2022
-
Other publication
- 5 October 2022
-
Weekly financial statementAnnexes
- 5 October 2022
-
Weekly financial statement - Commentary
- 5 October 2022
-
Working Paper Series - Issue No. 2737Details
- Abstract:
- The market turmoil in March 2020 highlighted key vulnerabilities in the EU money market fund (MMF) sector. This paper assesses the effectiveness of the EU's regulatory framework from a financial stability perspective, based on a panel analysis of EU MMFs at a daily frequency. First, we find that investment in private debt assets exposes MMFs to liquidity risk. Second, we find that low volatility net asset value (LVNAV) funds, which invest in non-public debt assets while offering a stable NAV, face higher redemptions than other fund types. The risk of breaching the regulatory NAV limit may have incentivised outflows among some LVNAV investors in March 2020. Third, MMFs with lower levels of liquidity buffers use their buffers less than other funds, suggesting low levels of buffer usability in stress periods. Our findings suggest fragility in the EU MMF sector and call for a strengthened regulatory framework of private debt MMFs.
- JEL Code:
- G11,G15,G23,G28
- 5 October 2022
-
Euro area economic and financial developments by institutional sector (early)
- 5 October 2022
-
Balance of payments (quarterly)
- 4 October 2022
-
Euro money market statistics
- 4 October 2022
-
MFI interest rate statistics
- 3 October 2022
-
Digital Euro Investigation Phase document
- 30 September 2022
-
SpeechDetails
- Subtitle:
- Speech by Isabel Schnabel, Member of the Executive Board of the ECB, at a panel on the “Fight against inflation” at the IV Edition Foro La Toja
Annexes- 30 September 2022
-
Speech
- 29 September 2022
-
SpeechDetails
- Subtitle:
- Keynote speech by Frank Elderson, Member of the Executive Board of the ECB and Vice-Chair of the Supervisory Board of the ECB, at De Nederlandsche Bank/Official Monetary and Financial Institutions Forum conference on “Moving beyond climate: integrating biodiversity into financial markets” at Artis Zoo in Amsterdam
- 29 September 2022
-
SpeechDetails
- Subtitle:
- Remarks by Luis de Guindos, Vice-President of the ECB, at a panel at the conference “Future of Central Banking” organised by Lietuvos bankas and the Bank for International Settlements
- 29 September 2022
-
Digital Euro Investigation Phase - Progress ReportRelated
- 29 September 2022
- 29 September 2022
- 29 September 2022
-
SpeechDetails
- Subtitle:
- Introductory statement by Fabio Panetta, Member of the Executive Board of the ECB, at the Committee on Economic and Monetary Affairs of the European Parliament
Related- 29 September 2022
- 29 September 2022
-
Digital Euro Governance
- 29 September 2022
-
Letters to MEPsRelated
- 29 September 2022
- 29 September 2022
-
Digital Euro Governance
- 28 September 2022
-
SpeechDetails
- Subtitle:
- Keynote speech by Frank Elderson, Member of the Executive Board of the ECB and Vice-Chair of the Supervisory Board of the ECB, at the European Parliament conference on “Greening monetary policy in times of soaring inflation”
- 28 September 2022
-
Working Paper Series - Issue No. 2736Details
- Abstract:
- We study interest rates transmission to savings at low and negative rates. Exploiting cohorts of consumers from a data-rich multi-country survey, we show how the strength of interest rate transmission to savings varies with the level of nominal interest rates. This response is positive when interest rates are high but declines steadily at lower levels. At very low levels, there is evidence that the savings response may even reverse sign. Such a “savings’ reversal” is consistent with the behavioural evidence on money illusion as well as with a negative signalling effect from policy announcements in a liquidity trap and may weaken the direct stimulatory effects from very low and negative rates. Consistent with this, the reversal appears to be causally related to central bank information shocks and concentrated among older consumers and consumers with lower educational attainment.
- JEL Code:
- D12,D84,E21,E31,E52
- 28 September 2022
-
Working Paper Series - Issue No. 2735Details
- Abstract:
- Digitalisation may be viewed as a sequence of supply and technology shocks affecting the economy through productivity and output, employment and labour markets, competition and market structure. This paper focuses on the effects of digitalisation on economic growth, and how those effects may be impacted by institutions and governance. It discusses a number of theoretical mechanisms and empirical evidence for different sets of European and other countries. The results suggest that better institutions and governance tend to be associated with greater growth-enhancing effects from digital technologies.
- JEL Code:
- E22,O33,O43,O52,O57
- 28 September 2022
-
The ECB BlogDetails
- JEL Code:
- D53,E44,G12,G15
- Subtitle:
- Russia’s unprovoked invasion of Ukraine marks the return of geopolitical risk to Europe. Here the ECB blog looks at how global stock markets reacted to this risk and what role time and distance have played.
- 28 September 2022
-
Research Bulletin - Issue No. 99Details
- Abstract:
- While there is broad consensus that carbon pricing is an effective instrument for combatting climate change, the potential contribution of central banks is still debated. Central banks around the world have adopted different strategies to consider climate change in their monetary policy frameworks. This article focuses on green quantitative easing (QE). Compared with a carbon tax, we find that green QE would contribute only moderately to reducing global temperatures, while partially crowding out green private investment. However, green QE could serve as a complementary instrument, especially if governments fail to coordinate on introducing a sufficiently ambitious carbon tax on the global scale.
- JEL Code:
- E51,E62,Q54
- 27 September 2022
-
Weekly financial statementAnnexes
- 27 September 2022
-
Weekly financial statement - Commentary
- 27 September 2022
-
Working Paper Series - Issue No. 2734Brexit, what Brexit? Euro area portfolio exposures to the United Kingdom since the Brexit referendumDetails
- Abstract:
- We study euro area investors' portfolio adjustment since the Brexit referendum in terms of securities issued in the UK or denominated in pound sterling, in the context of heightened policy uncertainty surrounding the exit process of the UK from the EU. Our sector-level analysis "looks-through" holdings of investment fund shares to gauge euro area sectors' full exposures to debt securities and listed shares. Our key finding is the absence of a negative "Brexit-effect" for euro area investors, which would have rendered UK-issued and pound-denominated securities generally less attractive. Instead, we observe that euro area investors increased their absolute and relative exposures to UK-issued and pound-denominated debt securities since the Brexit referendum. The analysis also reveals an increase in the euro area's exposure to listed shares issued by UK non-financial corporations, while the exposures to shares issued by UK banks declined. These findings should be seen against the backdrop of low yields on euro area debt securities and a strong recovery in UK share prices since the Brexit referendum, which appear to have largely outweighed the uncertainties associated with Brexit.
- JEL Code:
- F30,F41,G15
- 27 September 2022
-
Working Paper Series - Issue No. 2733Details
- Abstract:
- How do households adjust to a large debt shock? This paper studies household responses to a revaluation of foreign currency household debt during a large depreciation in Hungary. Relative to similar local currency debtors, foreign currency debtors reduce consumption expenditures approximately one-for-one with increased debt service, suggesting binding liquidity constraints. Foreign currency debtors reduce both the quantity and quality of expenditures, consistent with nonhomothetic preferences and a “flight from quality.” Debt revaluation has no effect on labor market status, hours, or earnings, but there is a small adjustment toward foreign income streams and a substantial increase in home production.
- JEL Code:
- E21,G51,J20
- 27 September 2022
-
Monetary developments in the euro areaAnnexes
- 27 September 2022
-
Monetary developments in the euro area
- 27 September 2022
-
InterviewDetails
- Subtitle:
- Interview with Philip R. Lane, Member of the Executive Board of the ECB, conducted by András Szigetvari on 20 September 2022
- 26 September 2022
-
SpeechDetails
- Subtitle:
- Speech by Christine Lagarde, President of the ECB, at the Hearing of the Committee on Economic and Monetary Affairs of the European Parliament
Annexes- 26 September 2022
- 26 September 2022
-
Working Paper Series - Issue No. 2732Details
- Abstract:
- We study how banks manage their liquidity among the various assets at their disposal. We exploit the introduction of the ECB’s two-tier system which heterogeneously reduced the cost of additional reserves holdings. We find that the treated banks increase reserve holdings by borrowing on the interbank market, decreasing lending to affiliates of the same group, and selling marketable securities. We also find that banks have a preference for a stable portfolio composition of liquid assets over time. Our results imply that frictions in one market for liquidity can spill over to several markets.
- JEL Code:
- G21,G11,E52
- 26 September 2022
-
Working Paper Series - Issue No. 2731Details
- Abstract:
- We build currency portfolios based on the paradigm that exchange rates slowly converge to their equilibrium to highlight three results. First, this property can be exploited to build profitable portfolios. Second, the slow pace of convergence at short-horizons is consistent with the evidence of profitable carry trade strategies, i.e. the common practice of borrowing in low-yield currencies and investing in high-yield currencies. Third, the predictive power of equilibrium exchange rates may boost the performance of carry trade strategies.
- JEL Code:
- F31,G12,G15
- 26 September 2022
-
SpeechDetails
- Subtitle:
- Speech by Fabio Panetta, Member of the Executive Board of the ECB, at the Symposium on “Payments and Securities Settlement in Europe – today and tomorrow” hosted by the Deutsche Bundesbank
- 23 September 2022
-
Governing Council decisions - Other decisions
- 23 September 2022
-
Working Paper Series - Issue No. 2730Details
- Abstract:
- We propose a new and time-varying optimum currency area (OCA) index for the euro area in assessing the evolution of the OCA properties of the monetary union from an international business cycle perspective. It is derived from the relative importance of symmetric vs. asymmetric shocks that result from a sign and zero restricted open-economy structural vector autoregression (VAR) model. We argue that the euro area is more appropriate through the lens of empirical OCA properties when the relative importance of common symmetric shocks is high, but, at the same time, is not overly dispersed across euro area member countries. We find that symmetric shocks have been the dominant drivers of business cycles across euro area countries. Our OCA index, nevertheless, shows that cyclical convergence among euro area members is not a steady process as it tends to be disrupted by crises, especially those not primarily triggered by common external shocks. In the aftermath of a crisis the OCA index embarks on a recovery trajectory catching up with its pre-crisis level. Our OCA index is slow-moving and a good reflection of changing underlying economic structures across the euro area and, therefore, informative about the ability of monetary policy to stabilise the euro area economy in the medium run.
- JEL Code:
- F33,F44,E42
- 23 September 2022
-
Working Paper Series - Issue No. 2729Details
- Abstract:
- Payments are a key focus of central banks, as - together with the safe, efficient operation of the payments market – wide access to cash is fundamentally important for a healthy economy. In this study, three main research areas were investigated: 1. socioeconomic characteristics that can be associated with financial inclusion; 2. factors behind consumers´ payment choices; 3. underlying factors for holding cash in a wallet (i.e. for transactional purposes). Regression results for the first research question confirmed the findings of international literature, i.e. mainly older age, lower income and lower educational level is associated with the lack of access to electronic payment options. The study pursues various approaches to investigate consumer payments choices, and the results from most models showed that those with higher level of income and education, or lower level of cash income are more likely to prefer and actually use electronic payment methods. Finally, concerning the holding of cash the initial expectations were confirmed i.e. those who do not use cash for daily transactions tend to keep less cash in their wallet, while those who indicated preference for cash payments or higher importance of cash payment option are more likely to keep higher cash amounts.
- JEL Code:
- D11,D12,E42,J33
- 22 September 2022
-
SpeechDetails
- Subtitle:
- Presentation by Isabel Schnabel, Member of the Executive Board of the ECB, at the Luxemburg - Frankfurt Financial Professionals meeting
- 22 September 2022
-
Working Paper Series - Issue No. 2728Details
- Abstract:
- The green bond market has increased rapidly in recent years amid growing concerns about climate change and wider environmental issues. However, whether green bonds provide cheaper funding to issuers by trading at a premium, so-called greenium, is still an open discussion. This paper provides evidence that a key factor explaining the greenium is the credibility of a green bond itself or that of its issuer. We define credible green bonds as those which have been under external review. Credible issuers are either firms in green sectors or banks signed up to UNEP FI. Another important factor is investors’ demand as the greenium becomes more statistically and economically significant over time. This is potentially driven by increased climate concerns as the green bond market follows a similar trend to that observed in ESG/green equity and investment fund sectors. To run our analysis, we construct a database of daily pricing data on closely matched green and non-green bonds of the same issuer in the euro area from 2016 to 2021. We then use Securities Holdings Statistics by Sector (SHSS) to analyse investors’ demand for green bonds.
- JEL Code:
- G12,G14,Q50,A56
- 22 September 2022
-
Working Paper Series - Issue No. 2727Details
- Abstract:
- What are the economic implications of financial and uncertainty shocks? We show that financial shocks cause a decline in output and goods prices, while uncertainty shocks cause a decline in output and an increase in goods prices. In response to un-certainty shocks, firms increase their markups, in line with the theory of self-insurance against being stuck with too low a price. This explains why goods prices may increase at the onset of a recession and are not accompanied by pronounced deflationary pressures. The two shocks are identified jointly with an approach that is less restrictive than Antolín-Díaz and Rubio-Ramírez’s method.
- JEL Code:
- C32,E32
- 22 September 2022
-
Economic Bulletin
- 22 September 2022
-
Economic Bulletin - BoxEconomic Bulletin Issue 6, 2022Details
- Abstract:
- In-house credit assessment systems (ICASs) of euro area national central banks are an important source of credit risk assessments for credit claims from non-financial corporates. These credit claims can be pledged as collateral in monetary policy operations. Climate change and the transition to a greener economy can affect the growth, financial performance, market position and business model of a company, and hence its creditworthiness. Therefore, as part of the ECB’s action plan for including climate change considerations in monetary policy implementation, the Governing Council has agreed a set of common minimum standards on incorporating these risks in ICAS rating processes. Assessments of climate change risks will mainly focus on the companies most affected and those which pose the highest risk to the Eurosystem. The analysis will be performed at firm level whenever sufficient data is available, using state-of-the-art methods and metrics. All ICASs will comply with the common minimum standards from end-2024 onwards.
- JEL Code:
- G32,Q54
- 22 September 2022
-
Economic Bulletin - BoxEconomic Bulletin Issue 6, 2022Details
- Abstract:
- This box describes the ECB’s liquidity conditions and monetary policy operations during the third and fourth reserve maintenance periods of 2022 from 20 April to 26 July.
- JEL Code:
- E40,E52,E58
- 22 September 2022
-
Economic Bulletin - BoxEconomic Bulletin Issue 6, 2022Details
- Abstract:
- Employment growth in the public sector has played an important role in supporting total employment during the pandemic. Following the small decline in public sector employment and the trough in economic activity in the second quarter of 2020, public sector employment has contributed about 1 percentage point (1.5 million persons) to the cumulative total employment growth of about 4.2% (6.6 million persons). Most of the employment growth in the public sector is associated with the health and education sub-sectors. In both of these sub-sectors, activity has not only increased during the pandemic but has also shown a positive trend over time. Specifically, unlike during previous euro area crises, temporary employment in the public sector has risen during the coronavirus (COVID-19) crisis and remains above its underlying trend by about 300,000 persons (0.2% of the euro area labour force). This increase in temporary public sector employment is itself driven mostly by the education and health sub-sectors and is probably due in particular to the health measures associated with the COVID-19 pandemic. As the impact of the pandemic recedes, this increase could be partly reversed.
- JEL Code:
- E24,J21
- 22 September 2022
-
InterviewDetails
- Subtitle:
- Interview with Isabel Schnabel, Member of the Executive Board of the ECB, conducted by Florian Schmidt on 15 September 2022
- 21 September 2022
-
Working Paper Series - Issue No. 2726Details
- Abstract:
- We analyse a gradual increase in the tax on emissions in a simple two-period New Keynesian model with an AS-AD representation. We find that the increase in the tax today exerts inflationary pressures, but the expected further increase in the tax tomorrow depresses current demand, putting downward pressure on prices: we show that the second effect is larger. However, if households do not anticipate a future fall in income (because they are not rational or the government is not credible), the overall effect of the transition may be inflationary in the first period. We extend the analysis in a medium-scale DSGE model and we find again that the green transition is deflationary. Also in this larger model, by relaxing the rational expectations assumption, we show the transition may initially be inflationary.
- JEL Code:
- D84,E31,Q58
- 21 September 2022
-
Working Paper Series - Issue No. 2725Details
- Abstract:
- One important source of systemic risk can arise from asset commonality among financial institutions. This indirect interconnection may occur when financial institutions invest in similar or correlated assets and is also described as overlapping portfolios. In this work, we propose a methodology to quantify systemic risk derived from asset commonality and we apply it to assess the degree of indirect interconnection of banks due to their financial holdings. Based on granular information of asset holdings of European significant banks, we compute the sensitivity based ∆ CoVaR which captures the potential sources of systemic risk originating from asset commonality. The novel indicator proves to be consistent with other indicators of systemic importance, yet it has a more transparent foundation in terms of the source of systemic risk, which can contribute to effective macroprudential supervision.
- JEL Code:
- C58,E32,G01,G12,G18,G20,G32
- 21 September 2022
-
Economic Bulletin - ArticleEconomic Bulletin Issue 6, 2022Details
- Abstract:
- Mitigating climate change requires sustained and multipronged policy efforts, as a matter of urgency. Many initiatives to mitigate climate change are directly linked to fiscal policy, mainly through public spending or taxation. This article provides an overview of existing, required and expected fiscal climate policy efforts to advance the green transition in the euro area, focusing on carbon pricing and green public investment. It also looks at the distributional consequences of carbon pricing.
- JEL Code:
- H23,H30,Q52,Q58
- 20 September 2022
-
SpeechDetails
- Subtitle:
- Karl Otto Pöhl Lecture by Christine Lagarde, President of the ECB, organised by Frankfurter Gesellschaft für Handel, Industrie und Wissenschaft
- 20 September 2022
-
Weekly financial statementAnnexes
- 20 September 2022
-
Weekly financial statement - Commentary
- 20 September 2022
-
Working Paper Series - Issue No. 2724Details
- Abstract:
- This paper studies for the first time the links between interbank liability and equity markets (financial exposure), and mergers and acquisitions (M&As) in the European banking sector, both at the micro and macro level. Using a binary logit model, the paper first examines – at the micro level – how financial exposures between banks affect the probability of M&A. It finds that financial interlinkages significantly increase the chances of them taking place. Using a gravity model, the paper then investigates – at the macro level – whether the micro results hold. Not only do financial links are positively and significantly correlated with the number of M&As between countries, but they are also a better predictor than trade – traditionally used in the macro literature on M&A. Since the Capital Market Union would help to geographically diversify banks’ portfolio, it would therefore also foster cross-border M&As. Finally, the paper builds a M&A compatibility index for each pair of EU countries. The study highlights strong M&As prospects linked to high financial interlinkages in core Europe, which could be the sign of a future asymmetrical financial integration in the EU.
- JEL Code:
- G21,G34,F21,F34,F36
- 20 September 2022
-
Working Paper Series - Issue No. 2723Details
- Abstract:
- This paper studies optimal second-best corrective regulation, when some agents/activities cannot be perfectly regulated. We show that policy elasticities and Pigouvian wedges are sufficient statistics to characterize the marginal welfare impact of regulatory policies in a large class of environments. We show that a subset of policy elasticities, leakage elasticities, determine optimal second-best policy, and characterize the marginal value of relaxing regulatory constraints. We apply our results to scenarios with unregulated agents/activities, uniform regulation across agents/activities, and costly regulation. We illustrate our results in applications to financial regulation with environmental externalities, shadow banking, behavioral distortions, asset substitution, and fire sales.
- JEL Code:
- H23,Q58,G28,D62
- Network:
- ECB Lamfalussy Fellowship Programme
- 20 September 2022
-
Balance of payments (monthly)
- 20 September 2022
-
Economic Bulletin - BoxEconomic Bulletin Issue 6, 2022Details
- Abstract:
- The strong rise in inflation has renewed attention on longer-term inflation expectations. The distribution of individual longer-term inflation expectations from the ECB Survey of Professional Forecasters has recently recentred around 2%, although some respondents have lately raised their inflation expectations clearly above 2%. Some commentators have argued that movements in the upper “tails” of the inflation expectations’ distribution might signal a possible de-anchoring of expectations. This box takes a closer look at recent movements in long-term inflation expectations, especially of those forecasters currently in the upper tail of the distribution. We find that (a) historically, this tail group's longer-term inflation expectations have been higher, more volatile and more sensitive to realised inflation than the expectations of the rest of respondents, (b) respondents in this tail group perceive the current inflation spike to be more persistent, and (c) the evidence suggests that their expectations have not led movements in those of the rest of the professional forecasters.
- JEL Code:
- E3,D83,D84
- 20 September 2022
-
Economic Bulletin - BoxEconomic Bulletin Issue 6, 2022Details
- Abstract:
- The COVID-19 pandemic triggered a temporary decrease in the labour market activity of older workers in the euro area. Our analysis finds that a part of the decrease was driven by a pandemic-induced shift in the retirement decisions of older workers, affecting around 175,000 people. This represents 0.5% of the labour force aged 55-74 retiring earlier than planned due to the pandemic. The heightened economic uncertainty and health risks stemming from the pandemic persuaded some older workers either to bide their time before returning to work or to retire early. Early retirement was most pronounced for workers in poorer health, stressing the growing importance of health risks for labour market developments.
- JEL Code:
- E24,J14,J26
- 19 September 2022
-
Occasional Paper Series - Issue No. 306Details
- Abstract:
- This article surveys the literature on consumption risk sharing, focusing on the findings for the euro area and for the United States, but also presenting evidence for other countries. The literature examined found that risk sharing is higher in more mature federations, such as the United States, than in the euro area. The papers surveyed suggest that state/country-specific output shocks are primarily smoothed out through the capital and credit channel, whereas the fiscal channel as a minor role, especially in the euro area. Overall, about 70% of shocks is smoothed in the United States while just 40% in the euro area. At the same time, our analysis of the response to the COVID-19 crisis indicates that risk sharing in the euro area has been more resilient than it was during the global financial crisis of 2008-09. Overall, our results point to the need for further improvements to the private and public risk-sharing channels in the euro area to ensure more effective cushioning against asymmetric shocks and to boost progress towards the completion of European Monetary Union (EMU).
- JEL Code:
- C23,E62,G11,G15
- 19 September 2022
- 19 September 2022
-
Economic Bulletin - BoxEconomic Bulletin Issue 6, 2022Details
- Abstract:
- Against a background of rising mortgage rates, this box investigates the impact of changes in mortgage rates on euro area house prices and housing investment through linear and non-linear local projections. The model evidence suggests that housing market dynamics are very sensitive to mortgage rates, especially in a low interest rate environment. At the current juncture, this points to a significant risk of a marked slowdown of the euro area housing market. Yet, pandemic-induced shifts in housing preferences, which are not captured by the models, could counteract higher mortgage rates and could potentially increase uncertainty surrounding the housing outlook.
- JEL Code:
- E22,E31,E32
- 17 September 2022
-
SpeechDetails
- Subtitle:
- Presentation by Philip R. Lane, Member of the Executive Board of the ECB, at the 45th DEW Annual Economic Policy Conference
- 16 September 2022
- 16 September 2022
- 16 September 2022
- 16 September 2022
- 16 September 2022
- 16 September 2022
- 16 September 2022
-
Working Paper Series - Issue No. 2722Details
- Abstract:
- Market participants use leveraged derivatives to gain access to equity market exposure through broker banks. Leverage and interconnectedness via overlapping portfolios of dealer banks can amplify adverse market movements, potentially causing sizeable losses. I propose a model, based on granular data, to simulate losses from a banks’ trading book in case of an adverse market scenario. Following a move in asset prices, banks mark their positions and issue margin calls; some (leveraged) counterparties fail to pay their margins, forcing banks to liquidate their positions causing a pressure on asset prices due to market impact. The impact is amplified because of the leverage and when counterparties are exposed to multiple banks over the same underlying. I employ the model to assess current capital and margin rules in covering risks from broker’s exposure to highly leveraged clients.
- JEL Code:
- C60,G23,G13,G17
- 16 September 2022
-
InterviewDetails
- Subtitle:
- Interview with Luis de Guindos, Vice-President of the ECB, conducted by João Silvestre on 9 September
- 16 September 2022
-
Digital Euro Investigation Phase documentAnnexes
- 16 September 2022
-
Digital Euro Investigation Phase document
- 16 September 2022
-
Digital Euro Investigation Phase document
- 16 September 2022
-
Digital Euro Investigation Phase document
- 16 September 2022
-
Digital Euro Investigation Phase document
- 15 September 2022
-
SpeechDetails
- Subtitle:
- Speech by Luis de Guindos, Vice-President of the ECB, at the CIRSF (Research Centre on Regulation and Supervision of the Financial Sector) Annual International Conference 2022 “The future of the EU financial system in a new geo-economic context”
- 15 September 2022
-
Working Paper Series - Issue No. 2721Details
- Abstract:
- The network structure of non-centrally cleared derivative markets, uncovered via the European Market Infrastructure Regulation (EMIR), is investigated with a focus on the Covid-19 market turmoil period. Initial and variation margin networks are reconstructed to analyze channels of potential losses and liquidity dynamics. Despite the absence of central clearing, the derivative network is found to be ultrasmall and a filtering tool is proposed to identify channels in the network characterized by the highest exposures. I find these exposures to be mainly toward institutions outside the euro-area (EA), emphasizing the need for cooperation across different jurisdictions. Anomalous behavior in terms of diverging first and second moments on the degree and strength distributions are detected, signaling the presence of large exposures generating extreme liquidity outflows. A reference table of parameters’ estimates based on real data is provided for different network sizes, with no break of confidentiality, making possible to simulate in a realistic way the liquidity dynamic in global derivative markets even when the access to supervisory data is not granted.
- JEL Code:
- G01,G15,G23
- 15 September 2022
-
Working Paper Series - Issue No. 2720Details
- Abstract:
- This paper investigates the impact of the capital relief package adopted to support euro area banks at the outbreak of the COVID-19 pandemic. By leveraging confidential supervisory and credit register data, we uncover two main findings. First, capital relief measures support banks' capacity to supply credit to firms. Second, not all measures are equally successful. Banks adjust their credit supply only if the capital relief is permanent or implemented through established processes that foresee long release periods. By contrast, discretionary relief measures are met with limited success, possibly owing to the uncertainty surrounding their capital replenishment path. Moreover, requirement releases are more effective for banks with a low capital headroom over requirements and do not trigger additional risk-taking. These findings provide key insights on how to design effective bank capital requirement releases in crisis time.
- JEL Code:
- E61,G01,G18,G21
- 15 September 2022
-
Other publication
- 15 September 2022
- 15 September 2022
- 15 September 2022
- 14 September 2022
-
Working Paper Series - Issue No. 2719Details
- Abstract:
- We use household surveys to describe differences in wages, income, wealth and liquid assets of households born in their country of residence (“natives”) vs. those born in other EU and non-EU countries (“immigrants”). The differences in wealth are more substantial than the differences in wages and incomes: immigrants earn on average about 30% lower wages than natives and hold roughly 60% less net wealth. For all variables, only a small fraction of differences between natives and immigrants—around 30%—can be explained by differences in demographics (age, gender, marital status, education, occupation, sector of employment). Immigrants are more likely to be liquidity constrained: while about 17% of natives can be labelled as “hand-to-mouth” (holding liquid assets worth less than two weeks of income), the corresponding share is 20% for households born in another EU country and 29% for those born outside the EU. Employment rates of immigrants are substantially more sensitive to fluctuations in aggregate employment. Monetary policy easing stimulates more strongly employment of individuals born outside the EU.
- JEL Code:
- J15,D31,E52
- Network:
- Discussion papers
- 14 September 2022
-
SpeechDetails
- Subtitle:
- Opening remarks by Philip R. Lane, Member of the Executive Board of the ECB, Meeting of the Money Market Contact Group
- 14 September 2022
-
Occasional Paper Series - Issue No. 305Details
- Abstract:
- This paper provides a chronology of the main financial events over the last 15 years, spanning three main crises. The first is the global financial crisis in 2008-09, and the second is the euro area sovereign debt crisis in 2010-12. Both events heralded significant reforms of the EU’s governance and financial architecture. On the tail of these two crises, the ongoing COVID-19 crisis that started in early 2020 enables us to assess the working of the resulting financial framework. Two aspects stand out. The first is that the coronavirus crisis was, in its origin, exogenous from previous banking sector behaviours -which was not the case during the 2008-2012 period. The second aspect stems from the combined policy responses to the pandemic, which lacked in the 2008-2012 period. Against this background, the aim of this paper is twofold. The first is to highlight the sequence of regulatory and institutional changes, with a focus on the ECB and Eurosystem, vis-à -vis the unfolding events and against the background of broader financial reforms. The second aim of this paper is to investigate whether the sequence of financial reforms has improved the sector’s ability to deal with major macro-financial shocks at the EU/euro area level, reducing the sovereign-bank doom loop. We focus primarily on developments affecting the banking sector, while noting that during the same period major developments within the EU non-bank financial sector were observed. The COVID-19 crisis has been characterized by the positive interaction of rapid fiscal and monetary responses (macro polices), and joint financial and supervisory responses. In this new policy environment the message of the paper is that the sequence of financial reforms, including the acquisition of supervisory and financial stability tasks by the ECB, have been instrumental in facilitating the effective response to the COVID-19 crisis thus far, especially compared to the previous two crises. The increased resilience and resolvability of the EU banking sector has enabled it to withstand the large and unexpe
- JEL Code:
- E42,E58,F36,G21
- 14 September 2022
-
Discussion Paper Series - Issue No. 21Details
- Abstract:
- We use household surveys to describe differences in wages, income, wealth and liquid assets of households born in their country of residence (“natives”) vs. those born in other EU and non-EU countries (“immigrants”). The differences in wealth are more substantial than the differences in wages and incomes: immigrants earn on average about 30% lower wages than natives and hold roughly 60% less net wealth. For all variables, only a small fraction of differences between natives and immigrants—around 30%—can be explained by differences in demographics (age, gender, marital status, education, occupation, sector of employment). Immigrants are more likely to be liquidity constrained: while about 17% of natives can be labelled as “hand-to-mouth” (holding liquid assets worth less than two weeks of income), the corresponding share is 20% for households born in another EU country and 29% for those born outside the EU. Employment rates of immigrants are substantially more sensitive to fluctuations in aggregate employment. Monetary policy easing stimulates more strongly employment of individuals born outside the EU.
- JEL Code:
- J15,D31,E52
- 14 September 2022
-
The ECB BlogDetails
- JEL Code:
- E31,J16
- Subtitle:
- Women and men shop differently and have different perceptions of prices and inflation. This ECB Blog post examines how inflation expectations are formed and revised across gender and why that matters for central banks.
Related- 28 July 2022
- 24 August 2022
- 13 September 2022
-
Weekly financial statementAnnexes
- 13 September 2022
-
Weekly financial statement - Commentary
- 13 September 2022
-
Occasional Paper Series - Issue No. 304Details
- Abstract:
- The Eurosystem implements its monetary policy through a set of monetary policy instruments (MPIs) that are either part of the standard toolbox or are developed to deal with major economic and financial events with a potential adverse impact on price stability and/or the transmission of monetary policy. In the review period covered by this report (2020-2021), monetary policy action was dominated by the Eurosystem’s response to the negative economic effects of the outbreak of the COVID-19 pandemic. Through its action, the Eurosystem continued to expand its balance sheet, in particular by scaling up its outright asset purchases and easing the conditions of its targeted longer-term refinancing operations (TLTROs), complemented by temporary changes in the collateral framework. The accommodative monetary policy stance was preserved by maintaining the key ECB interest rates at record-low levels, reinforced by the ECB’s forward guidance on policy rates. This report provides a full overview of the Eurosystem’s monetary policy implementation over the years 2020 and 2021.
- JEL Code:
- D02,E43,E58,E65,G01
- 13 September 2022
-
Occasional Paper Series - Issue No. 303Details
- Abstract:
- Climate change can be a source of financial risk. This paper examines how credit rating agencies accepted by the Eurosystem incorporate climate change risk in their credit ratings. It also analyses how rating agencies disclose their assessments of climate change risks to rating users. The paper develops an analytical framework to compare the agencies’ definitions, methodologies, assessment models, data usage and disclosure practices. The paper reveals large differences in methodologies and disclosure practices across rating agencies and asset classes. The authors identify three main areas for improvement with respect to climate-related disclosures. These areas concern the level of granularity of definitions of climate change risk, the transparency around models and methods used to estimate the exposure to climate change risk and the disclosure of the magnitude of the impact of material climate change risk on credit ratings.
- JEL Code:
- E52,E58,G24,G32,Q54
- 13 September 2022
-
Euro area pension fund statisticsAnnexes
- 12 September 2022
-
Euro area pension fund statistics
- 12 September 2022
-
SpeechDetails
- Subtitle:
- Welcome address by Isabel Schnabel, Member of the Executive Board of the ECB, at the seventh ECB Annual Research Conference
- 12 September 2022
-
Occasional Paper Series - Issue No. 302Details
- Abstract:
- This paper reviews the experience of the ECB with the two-tier system for excess reserve remuneration that exempted a portion of banks’ excess liquidity (EL) holdings from the negative interest rate of the ECB’s deposit facility.
- JEL Code:
- E41,E43,E52,E58,G11,G12
- 12 September 2022
-
Occasional Paper Series - Issue No. 301Details
- Abstract:
- This paper proposes a methodology for measuring the macroprudential policy stance based on a distance-to-tail metric perspective. This approach employs a large-scale semi-structural model reflecting the dynamics of 91 significant euro area banks and 19 euro area economies and is presented through an assessment of the stance evolution for the aggregate euro area economy and for the individual euro area countries. Our results uncover mild tightening of the macroprudential policy stance before the end of 2019. This trend is abruptly interrupted at the onset of the Covid-19 pandemic but reappears at the end of 2020 before picking up again over the first half of 2021. Our assessment also reveals a marginal impact of the macro-financial policies applied, which is particularly notable throughout 2020.
- JEL Code:
- E37,E58,G21,G28
- 12 September 2022
-
Survey of Monetary Analysts - Aggregate results
- 9 September 2022
-
Working Paper Series - Issue No. 2718Details
- Abstract:
- Do negative interest rates affect banks’ cost efficiency? We exploit the unprecedented introduction of negative policy interest rates in the euro area to investigate whether banks make a virtue out of necessity in reacting to negative interest rates by adjusting their cost efficiency. We find that banks most affected by negative interest rates responded by enhancing their cost efficiency. We also show that improvements in cost efficiency are more pronounced for banks that are larger, less profitable, with lower asset quality and that operate in more competitive banking sectors. In addition, we document that enhancements in cost efficiency are statistically significant only when breaching the zero lower bound (ZLB), indicating that the pass-through of interest rates to cost efficiency is not effective when policy rates are positive. These findings hold important policy implications as they provide evidence on a beneficial second-order effect of negative interest rates on bank efficiency.
- JEL Code:
- E43,E44,E52,G21,F34
- 9 September 2022
-
Working Paper Series - Issue No. 2717Details
- Abstract:
- The COVID-19 crisis has affected economic sectors very heterogeneously, with possible risks for permanent losses in some sectors. This paper presents a sectoral-level, bottom-up method to estimate euro area potential output in order to assess the impact of the crisis on it. The estimates are based on a supply-demand shock decomposition and are meant to quantitatively support the estimation of scarring effects stemming from the pandemic. The results show that sectors of “trade, transport and accommodation”, “other services” and “industry” may suffer a loss in trend output of around 1.4-1.6% by 2025. Aggregate potential output in 2025 might be about 0.8% lower than it would have been without the crisis, and importantly, without support from the Next Generation EU (NGEU), signalling somewhat larger losses than embedded in the Autumn 2021 forecast of the European Commission (which takes the NGEU into account).
- JEL Code:
- C32,D24,E32,E37
- 8 September 2022
-
PodcastRelated
- 8 September 2022
-
Monetary policy statementDetails
- Subtitle:
- Christine Lagarde, President of the ECB,
Luis de Guindos, Vice-President of the ECB
- 8 September 2022
-
Press releaseRelated
- 8 September 2022
-
Monetary policy decision
- 8 September 2022
-
Macroeconomic projections for the euro areaAnnexes
- 8 September 2022
- 8 September 2022
-
Combined monetary policy decisions and statementRelated
- 8 September 2022
-
Monetary policy statement
- 8 September 2022
-
Monetary policy decision
- 8 September 2022
-
Monetary policy statementDetails
- Subtitle:
- Christine Lagarde, President of the ECB,
Luis de Guindos, Vice-President of the ECB
Related- 8 September 2022
-
Combined monetary policy decisions and statement
- 8 September 2022
- 8 September 2022
-
Monetary policy decisionRelated
- 8 September 2022
-
Combined monetary policy decisions and statement
- 8 September 2022
- 6 October 2022
-
Monetary policy account
- 6 September 2022
-
Weekly financial statementAnnexes
- 6 September 2022
-
Weekly financial statement - Commentary
- 2 September 2022
-
Consumer Expectation Survey
- 2 September 2022
-
Consumer Expectation Survey
- 2 September 2022
-
Consumer Expectation Survey
- 2 September 2022
-
Consumer Expectation Survey
- 2 September 2022
-
Press release
- 1 September 2022
-
MFI interest rate statistics
- 1 September 2022
-
Digital Euro Investigation Phase documentAnnexes
- 1 September 2022
-
Digital Euro Investigation Phase document
- 1 September 2022
-
Digital Euro Investigation Phase document
- 1 September 2022
-
Digital Euro Investigation Phase document
- 21 September 2022
-
Digital Euro Investigation Phase document
- 31 August 2022
-
Euro area insurance corporations statisticsAnnexes
- 31 August 2022
-
Euro area insurance corporations statistics
- 30 August 2022
-
Weekly financial statementAnnexes
- 30 August 2022
-
Weekly financial statement - Commentary
- 29 August 2022
-
SpeechDetails
- Subtitle:
- Remarks for high-level panel “High Inflation and Other Challenges for Monetary Policy” by Philip R. Lane, Member of the Executive Board of the ECB, Annual Meeting 2022 of the Central Bank Research Association (CEBRA), Barcelona
- 27 August 2022
-
SpeechDetails
- Subtitle:
- Speech by Isabel Schnabel, Member of the Executive Board of the ECB, at the Jackson Hole Economic Policy Symposium organised by the Federal Reserve Bank of Kansas City, Jackson Hole, Wyoming
- 26 August 2022
-
Monetary developments in the euro areaAnnexes
- 26 August 2022
-
Monetary developments in the euro area
- 25 August 2022
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Monetary policy accountRelated
- 21 July 2022
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Monetary policy decision
- 25 August 2022
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InterviewDetails
- Subtitle:
- Interview with Christine Lagarde, President of the ECB, conducted by Morgane Miel on 13 July 2022 and published on 25 August 2022
- 24 August 2022
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The ECB BlogDetails
- JEL Code:
- E52,E58
- Subtitle:
- Communication with the general public matters for monetary policy. Although it is hard for central banks to reach out to the wider public, a recent study shows that explaining the inflation target and the ECB strategy to consumers can enhance its credibility.
Related- 13 October 2022
- 10 August 2022
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The ECB Blog
- 14 September 2022
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The ECB Blog
- 23 August 2022
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Weekly financial statementAnnexes
- 23 August 2022
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Weekly financial statement - Commentary
- 23 August 2022
-
SpeechDetails
- Subtitle:
- Presentation by Fabio Panetta, Member of the Executive Board of the ECB, at the Annual Congress of the European Economic Association at Bocconi University in Milan
- 22 August 2022
-
Working Paper Series - Issue No. 2716Details
- Abstract:
- We estimate the euro area output gap by applying the Beveridge-Nelson decomposition based on a large Bayesian vector autoregression. Our approach incorporates multivariate information through the inclusion of a wide range of variables in the analysis and addresses data issues associated with the COVID-19 pandemic. The estimated output gap lines up well with the CEPR chronology of the business cycle for the euro area and we find that hours worked, more than the unemployment rate, provides the key source of information about labor utilization in the economy, especially in pinning down the depth of the output gap during the COVID-19 recession when the unemployment rate rose only moderately. Our findings suggest that labor market adjustments to the business cycle in the euro area occur more through the intensive, rather than extensive, margin.
- JEL Code:
- C18,E17,E32
- 22 August 2022
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Survey of Monetary Analysts
- 19 August 2022
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Balance of payments (monthly)
- 18 August 2022
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SpeechDetails
- Subtitle:
- Presentation by Isabel Schnabel, Member of the Executive Board of the ECB, at Hochschule der Deutschen Bundesbank
- 18 August 2022
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Working Paper Series - Issue No. 2715Details
- Abstract:
- We analyse the effectiveness of optimal simple and implementable monetary and fiscal policy rules in stabilising economic activity, inflation and government debt in face of an occasionally binding lower bound on the nominal interest rate in a New Keynesian model. We show that, within the traditional assignment of active monetary policy and passive fiscal policy, the optimal fiscal policy rule features a strong counter-cyclical response to the deviation of inflation from the central bank’s target - providing significant macroeconomic stabilisation especially at the lower bound - while also featuring a strong response to government debt. Our quantitative results show that the optimal counter-cyclical fiscal feedback to inflation significantly improves welfare and reduces the lower-bound frequency. In addition, the optimal simple monetary and fiscal rules almost completely resolve the deflationary bias associated with the lower bound.
- JEL Code:
- E31,E52,E61,E62
- 18 August 2022
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Working Paper Series - Issue No. 2714Details
- Abstract:
- This paper studies monetary policy strategies under endogenous technology dynamics and low r*. Endogenous growth strengthens the gains from make-up strategies relative to inflation targeting, especially if policy space is reduced. This result is due to the long-run non-neutrality of money and the hysteresis effects in TFP through which ELB episodes generate permanent scars on long-run aggregate supply. Make-up strategies not only foster the alignment of inflation with target but also support productivity-improving investment in R&D and technology adoption and hence the long-run trend path, provided that the inherent make-up element is sufficiently pronounced. Inflation is less responsive to monetary policy due to the interaction with productivity dynamics. As a result, additional stimulus is required at the ELB and the degree of subsequent overshooting is alleviated. Endogenous growth also generates novel monetary policy trade-offs, most notably credibility challenges, which can be mitigated by confining make-up elements to ELB episodes.
- JEL Code:
- E24,E31,E32,E52,O30
- 18 August 2022
-
InterviewDetails
- Subtitle:
- Interview with Isabel Schnabel, Member of the Executive Board of the ECB, conducted by Balazs Koranyi and Frank Siebelt on 16 August 2022
- 17 August 2022
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Euro area investment fund statisticsAnnexes
- 17 August 2022
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Euro area investment fund statistics
- 17 August 2022
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Euro area financial vehicle corporation statisticsAnnexes
- 17 August 2022
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Euro area financial vehicle corporation statistics
- 16 August 2022
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Weekly financial statementAnnexes
- 16 August 2022
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Weekly financial statement - Commentary
- 16 August 2022
-
Working Paper Series - Issue No. 2713Details
- Abstract:
- This paper provides a structured overview of the burgeoning literature on the economics of CBDC. We document the economic forces that shape the rise of digital money and review motives for the issuance of CBDC. We then study the implications for the financial system and discuss of a number of policy issues and challenges. While the academic literature broadly echoes policy makers’ concerns about bank disintermediation and financial stability risks, it also provides conditions under which such adverse effects may not materialize. We also point to several knowledge gaps that merit further work, including data privacy and the study of end‐user preferences for attributes of digital payment methods.
- JEL Code:
- E41,E42,E51,E52,E58,G21
- Network:
- Discussion papers
- 16 August 2022
-
Working Paper Series - Issue No. 2712Details
- Abstract:
- A safe asset is of high credit quality, retains its value in bad times, and is traded in liquid markets. We show that bonds issued by the European Union (EU) are widely considered to be of high credit quality, and that their yield spread over German Bunds remained contained during the 2020 Covid-19 pandemic recession. Recent issuances and taps under the EU’s SURE and NGEU initiatives helped improve EU bonds' market liquidity from previously low levels, also reducing liquidity risk premia. Eurosystem purchases and holdings of EU bonds did not impair market liquidity. Currently, one obstacle to EU bonds achieving a genuine euro-denominated safe asset status, approaching that of Bunds, lies in the one-off, time-limited nature of the EU’s Covid-19-related policy responses.
- JEL Code:
- E58,G12,H63
- 16 August 2022
-
Discussion Paper Series - Issue No. 20Details
- Abstract:
- This paper provides a structured overview of the burgeoning literature on the economics of CBDC. We document the economic forces that shape the rise of digital money and review motives for the issuance of CBDC. We then study the implications for the financial system and discuss of a number of policy issues and challenges. While the academic literature broadly echoes policy makers’ concerns about bank disintermediation and financial stability risks, it also provides conditions under which such adverse effects may not materialize. We also point to several knowledge gaps that merit further work, including data privacy and the study of end‐user preferences for attributes of digital payment methods.
- JEL Code:
- E41,E42,E51,E52,E58,G21
- 16 August 2022
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Euro money market statistics
- 15 August 2022
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Working Paper Series - Issue No. 2711Details
- Abstract:
- What is the impact of stress tests on bank stock prices? To answer this question we study the impact of the publication of the EU-wide stress tests in 2014, 2016, 2018, and 2021 on the first (λ) and second (δ) moment of equity returns. First, we study the effect of the disclosure of stress tests on (cumulative) excess/abnormal returns through a one-factor market model. Second, we study whether both returns and volatility of bank stock prices changes upon the disclosure of stress tests through a structural GARCH model, developed by Engle and Siriwardane (2018). Our results suggest that the publication of stress tests provides new information to markets. Banks performing poorly in stress tests experience, on average, a reduction in returns and an increase in volatility, while the reverse holds true for banks performing well. Banks performing moderately have rather a small effect on both mean and variance process. Our findings are corroborated by the observed rank correlation between bank abnormal returns or equity volatility and stress test performance, which experiences a steady increase after each publication event. These results suggest that the publication of stress tests improves price discrimination between 'good' and 'bad' banks, which can be interpreted as a certification role of the stress tests in the stock market.
- JEL Code:
- G11,G14,G21,G28
- 15 August 2022
-
Working Paper Series - Issue No. 2710Details
- Abstract:
- We study third-party loan guarantees in a model in which lenders can screen, learn loan quality over time and can sell loans before maturity when in need of liquidity. Loan guarantees improve market liquidity and reduce lending standards, with a positive overall welfare effect. Guarantees improve the average quality of non-guaranteed loans traded and thus the market liquidity of these loans due to both selection and commitment. Because of this positive pecuniary externality, guarantees are insufficient and should be subsidized. Our results contribute to a debate about reforming government-sponsored mortgage guarantees by Fannie Mae and Freddie Mac.
- JEL Code:
- G01,G21,G28
- 12 August 2022
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Working Paper Series - Issue No. 2709Details
- Abstract:
- Between 2000 and 2007, the gender gap in earnings in the US real estate sector increased, especially in local markets where house prices appreciated relatively more. Firm frictions and the presence of small children in the household do not explain the widening of the gender gap, while sorting on entry and gender identity in relative income do. First, the industry attracted relatively more females with no prior experience, especially in booming local housing markets. Second, labor supply increased relatively more for experienced males with at least some college education who earn less than their spouses.
- JEL Code:
- J16,L85,O18
- 12 August 2022
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Working Paper Series - Issue No. 2708Details
- Abstract:
- This paper investigates the relationship between central bank (reverse) auctions and bill market liquidity. The analysis includes data on the purchases of bills in the auctions by the Dutch Central Bank under the European Central Bank’s Pandemic Emergency Purchase Programme (PEPP). The results indicate that auctions contribute to smooth market functioning. Two findings stand out. First, by purchasing bills using auctions rather than bilaterally, the central bank increases the bid-to-cover ratio at bill issuance, especially in times of stress. Second, bills are offered at larger sizes and lower prices in central bank auctions near primary issuance.
- JEL Code:
- E42,E44,E52,E58,G12
- 11 August 2022
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Working Paper Series - Issue No. 2707Details
- Abstract:
- Globalisation has a major impact on the levels and distribution of wealth. The financial markets are highly integrated, and valuations of financial assets follow international patterns, which has contributed to large increases in financial wealth over the past 25 years. Nonetheless, this has not led to an equally large increase in property income because the rates of return have decreased during the same era. Moreover, changes in functional income distribution (capital/labour shares) have not been fully transmitted to the distribution of primary income between households because other institutional sectors – particularly the government sector – hold considerable amounts of financial assets. At least in the short term, the decrease in rates of return seems to contradict claims that, due to an increase in both financial and inherited wealth, we are entering an era of increasing income inequality. In this article, the link between financial wealth and pre-tax household income distribution is scrutinised for three European countries using a conceptually fully consistent macro framework. First, national balance sheets are combined with the related income flows. After this, income flows that are not property income but are considered part of national income (e.g., wages and salaries) are added, the national income flows are broken down by institutional sector and the household sector income flows separated. Finally, distributional household micro data are used to break down the aggregate household sector income flows by income decile. The article utilises this framework to analyse the evolution of rates of return and capital and labour shares as well as how the property income flows created by financial wealth have affected household primary income distribution.
- JEL Code:
- D10,D31,D32,E21,G51
- 11 August 2022
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Working Paper Series - Issue No. 2706Details
- Abstract:
- We show that dealer market power impedes the pass-through of monetary policy in repo markets, which is an important first stage of monetary policy transmission. In the European repo market, most participants do not have access to trade on centralized exchanges. Rather, they rely on OTC intermediation by a small number of dealers that exhibit significant market power. As a result, the passthrough of the ECB’s policy rate to the majority of non-dealer banks and non-banks is inefficient and unequal in repo markets. Our estimates imply that a secured funding facility like the Fed’s RRP may alleviate dealer market power and improve the transmission efficiency of monetary policy to banks and non-bank financial institutions.
- JEL Code:
- E4,E5,G2
- 10 August 2022
-
Working Paper Series - Issue No. 2705Details
- Abstract:
- Parliamentary hearings are a fundamental tool to hold independent central banks accountable. However, it is not clear what type of information central banks provide when they communicate with parliaments compared to other existing information channels. In this article, we address this question by comparing the communication of the European Central Bank (ECB) in parliamentary hearings to its communication in the regular press conferences that follow monetary policy decisions. Using text analysis on the ECB President’s introductory statements in parliamentary hearings and press conferences from 1998 to 2021, we show that the ECB uses parliamentary hearings to discuss topics that are less covered in press conferences. We also find that the ECB’s policy stance in the hearings tends to reflect the stance in press conferences, and that the degree of language complexity is similar in the two fora. These findings support the view that the ECB mainly uses parliamentary hearings to further explain policy decisions first presented at press conferences but also to put them in a broader context.
- JEL Code:
- E02,E52,E58
- 10 August 2022
-
Working Paper Series - Issue No. 2704Details
- Abstract:
- We present a quantitative model of deposit insurance. We characterize the policymaker’s optimal choices of coverage for depositors and premiums raised from banks. Premiums contribute to a deposit insurance fund that lowers taxpayers’ resolution cost of bank failures. We find that risk-adjusted premiums reduce moral hazard, enabling the policymaker to increase deposit insurance coverage by 3 percentage points and decrease the share of expected annual bank failures from 0.66% to 0.16%. The model predicts a fund-to-covered-deposits ratio that matches the data and declines in taxpayers’ income due to taxpayers’ risk aversion.
- JEL Code:
- G21,G28
- Network:
- ECB Lamfalussy Fellowship Programme
- 10 August 2022
-
The ECB BlogDetails
- JEL Code:
- E52,E58,E31
- Subtitle:
- As part of our monetary policy strategy review we adopted a new symmetric 2% inflation target. One year on, we examine how the strategy review has helped anchor financial analysts’ inflation expectations. We also show that recent policy normalisation is grounded in our strategy.
Related- 24 August 2022
- 9 August 2022
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Weekly financial statementAnnexes
- 9 August 2022
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Weekly financial statement - Commentary
- 9 August 2022
-
Working Paper Series - Issue No. 2703Details
- Abstract:
- Recent research has argued that the COVID-19 shock has also brought about a reallocation shock. We examine the evidence for such an occurrence in the United States, taking a broad perspective. We first consider micro data from CPS and JOLTS; there is no noticeable uptick in occupation or sector switches, nor churn, either at the aggregate level or the cross-section, or when broken down by firms’ size. We then examine whether mismatch unemployment has risen as a result of the pandemic; using an off-the-shelf multisector search and matching model, there is little evidence for an important role for mismatch in driving the elevated unemployment rate. Finally, we employ a novel Bayesian SVAR framework with sign restrictions to identify a reallocation shock; we find that it has played a relatively minor role in explaining labor market patterns in the pandemic, at least relative to its importance in earlier episodes.
- JEL Code:
- E24,J63
- 9 August 2022
-
Working Paper Series - Issue No. 2702Details
- Abstract:
- Macroprudential policies should strengthen the banking sector throughout the financial cycle. However, while bank credit growth is used to capture cyclical exuberance and calibrate buffer requirements, it depends on potentially heterogeneous dynamics on the borrower and lender side. By decomposing credit growth into a common component and components capturing heterogeneity in supply and demand à la Amiti and Weinstein, 2018 applied on the euro area credit register ("AnaCredit"), we can inform the policy debates in two ways. Ex ante, we introduce a framework mapping the decomposition to different types of macroprudential instruments, specifically broad vs. targeted measures. Ex post, we also show that the resulting decomposition can be used to assess the effectiveness of adopted measures on credit supply or demand. We find evidence that buffer releases and credit guarantees increased bank credit supply during the COVID-19 pandemic and interacted positively with banks' profitability.
- JEL Code:
- E58,E52,E44,G21
- 9 August 2022
- 8 August 2022
-
Working Paper Series - Issue No. 2701Details
- Abstract:
- We develop a two-sector incomplete markets integrated assessment model to analyze the effectiveness of green quantitative easing (QE) in complementing fiscal policies for climate change mitigation. We model green QE through an outstanding stock of private assets held by a monetary authority and its portfolio allocation between a clean and a dirty sector of production. Green QE leads to a partial crowding out of private capital in the green sector and to a modest reduction of the global temperature by 0.04 degrees of Celsius until 2100. A moderate global carbon tax of 50 USD per tonne of carbon is 4 times more effective.
- JEL Code:
- E51,E62,Q54
- 8 August 2022
-
Working Paper Series - Issue No. 2700Details
- Abstract:
- In this article, we present a new perspective on forecasting technology adoption, focused on the extensive margin of adoption of multiple digital technologies in multiple countries. We do this by applying a Bayesian hierarchical structure to the seminal model of technology diffusion. After motivating the new perspective and the choices of priors, we apply the resulting framework to a cross-continental data set for EU and OECD countries and different digital technologies adopted by either households/individuals or by businesses. The results illustrate that the Bayesian hierarchical structure may be used to assess and predict both the adoption process and the uncertainty surrounding the data, and is robust to the use of alternative priors. They point to heterogeneity across countries and across technologies, mostly in the timing of adoption and, although to a lesser extent, the steady-state adoption rate once technologies are fully diffused. This suggests that characteristics of countries and technologies matter for technology diffusion.
- JEL Code:
- C11,C52,C53,O33,O57
- 8 August 2022
-
Other publication
- 5 August 2022
-
Working Paper Series - Issue No. 2699Details
- Abstract:
- Despite its stability over time, as for any statistical relationship, Okun’s law is subject to deviations that can be large at times. In this paper, we provide a mapping between residuals in Okun’s regressions and structural shocks identified with a SVAR model by inspecting how unemployment responds to the state of the economy. We show that deviations from Okun’s law are a natural and expected outcome once one takes a multi-shock perspective, as long as shocks to automation, labour supply and structural factors in the labour market are taken into account. Our simple recipe for policy makers is that, if a positive deviation from Okun’s law arises, it is likely to be generated by either positive labour supply or automation shocks or by negative structural factors shocks.
- JEL Code:
- E24,E32,C32
- 5 August 2022
-
Working Paper Series - Issue No. 2698Details
- Abstract:
- We propose the CoJPoD, a novel framework explicitly linking the cross-sectional and cyclical dimensions of systemic risk. In this framework, banking sector distress in the form of the joint probability of default of financial intermediaries (reflecting contagion from both direct and indirect interconnectedness) is conditioned on the financial cycle (reflecting the buildup and unwinding of system-wide balance sheet leverage). An empirical application to large systemic banks in the euro area, US and UK illustrates how the unravelling of excess leverage can magnify banking sector distress. Capturing this dependence of banking sector distress on prevailing financial imbalances can enhance risk surveillance and stress testing alike. An empirical signaling exercise confirms that the CoJPoD outperforms the individual capacity of either its unconditional counterpart or the financial cycle in signaling financial crises – particularly around their onset – suggesting scope to increase the precision with which macroprudential policies are calibrated.
- JEL Code:
- C19,C54,E58,G01,G21
- 4 August 2022
- 4 August 2022
-
Working Paper Series - Issue No. 2697Details
- Abstract:
- The ability of monetary policy to influence the term structure of interest rates and the macroeconomy depends on the extent to which financial market participants prefer to hold bonds of different maturities. We microfound such preferred-habitat demand in a fully-specified dynamic stochastic general equilibrium model of the macroeconomy where the term structure is arbitrage-free. The source of preferred habitat demand is an insurance fund that issues annuities and adopts a liability-driven strategy to minimise the duration risk on its balance sheet. The optimising behaviour of the insurance fund implies a preferred-habitat demand function that is upward-sloping in bond prices and downward-sloping in bond yields, especially when interest rates are low. This supports the operation of a recruitment channel at low interest rates, whereby long-term interest rates react strongly to short-term policy rates because of complementary changes in term premia induced by preferred-habitat demand. The strong reaction extends to inflation and output in general equilibrium, a through-the-looking-glass result that challenges conventional wisdom that preferred habitat weakens the transmission of monetary policy.
- JEL Code:
- E43,E44,E52,G21,G22
- 4 August 2022
-
Working Paper Series - Issue No. 2696Details
- Abstract:
- We investigate the factors driving current account and monetary policy developments in the euro area. We estimate an open-economy structural vector autoregression (VAR) model with zero and sign restrictions derived from a multi-country dynamic stochastic general equilibrium (DSGE) model to identify relevant shocks and analyse their impact on the current account and interest rate. Examining the VAR impulse responses for Germany, Italy and Spain we find that investment shocks and preference shocks drive the current account and interest rates in the opposite directions. By contrast, external demand shocks and productivity shocks cause both the current account balance and interest rate to move in the same direction. We also provide evidence for spillovers to the euro area from US preference shocks and US interest rate policy shocks.
- JEL Code:
- E32,F32,F45
- 4 August 2022
-
Occasional Paper Series - Issue No. 300Details
- Abstract:
- As the operator of a systemically important payment system (SIPS), the Eurosystem has the responsibility of regularly assessing the resilience of the Trans-European Automated Real-time Gross Settlement Express Transfer System (TARGET2) to various types of risks, as set out in the Principles for Financial Market Infrastructures (PFMIs) drawn up by the Committee on Payments and Market Infrastructures (CPMI) and International Organization of Securities Commissions (IOSCO). To identify, measure, monitor and mitigate these risks over time, the TARGET2 operator has developed specific approaches that include both qualitative and quantitative elements.
- JEL Code:
- G20,E42,E58,C10,C63
- 4 August 2022
-
Economic Bulletin
- 4 August 2022
-
Economic Bulletin - BoxEconomic Bulletin Issue 5, 2022Details
- Abstract:
- In the aftermath of Russia’s invasion of Ukraine, war-related disruptions and sanctions led to a sharp decline in trade flows with Russia. This box takes stock of recent and high frequency trade data to track flows of energy and agri-food commodities. It finds that Russia’s oil exports recovered from the post-invasion lows as some diversion of flows from sanctioning countries to Asia took place, whereas pipeline gas and agri-food commodity exports have significantly declined. The box provides an empirical assessment of the effects of the first round of sanctions in March 2022, which are estimated to have reduced Russian imports by about 15%.
- JEL Code:
- F13,F40,B40
- 4 August 2022
-
Press release
- 4 August 2022
-
Consumer Expectation Survey
- 4 August 2022
-
Consumer Expectation Survey
- 4 August 2022
-
Consumer Expectation Survey
- 4 August 2022
-
Consumer Expectation Survey
- 3 August 2022
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Occasional Paper Series - Issue No. 299Details
- Abstract:
- If the responses of wages – both private and public – and of pensions to an increase in inflation lead to second-round effects, this can make an inflationary shock more persistent, especially in the presence of automatic wage and pension indexation. This occasional paper presents an overview of the indexation schemes and other mechanisms for setting public wages and pensions across the euro area countries. It concludes that price indexation of public wages is relatively limited in the euro area, while public pensions are overwhelmingly automatically indexed, either fully or partially, to prices and wages.
- JEL Code:
- E62,J3,H55,E31
- 3 August 2022
-
Economic Bulletin - BoxEconomic Bulletin Issue 5, 2022Details
- Abstract:
- This box reviews wage share dynamics and potential second-round effects on inflation at times of energy price increases. Compared to a well-known episode with some similar features – the OPEC oil embargo in October 1973 – recent energy price increases have so far had limited implications for labour income and the GDP deflator. This contained impact reflects the relatively mild terms-of-trade loss and subdued real wage dynamics today compared to the 1970s. However, the experience in the United States in both episodes shows that significant increases in the GDP deflator may arise even in the presence of weak real wage growth. A model-based analysis finds that the transmission of energy price increases to inflation, and in particular the emergence of second-round effects, has been more limited or even absent since the start of monetary union. Nevertheless, high and persistent inflation increases the risk of second-round effects materialising via higher wages and profit margins.
- JEL Code:
- E24,E25,E31,E37
- 3 August 2022
-
Economic Bulletin - ArticleEconomic Bulletin Issue 5, 2022Details
- Abstract:
- This article takes stock of the impact of the coronavirus (COVID-19) crisis on business investment dynamics in the euro area and presents evidence on the main drivers of investment, as well as the opportunities, challenges and risks for its recovery, also in investment with respect to digitalisation and greening needs. Euro area business investment fell sharply in the first half of 2020. The considerable rebound and subsequent investment dynamics have been heterogenous across countries and types of investment, and the rebound has been overall somewhat weaker in the euro area than in the United States. While the recovery has been helped by substantial support from monetary and fiscal policy, headwinds such as increased uncertainty, commodity price rises and lingering supply bottlenecks risk delaying investment decisions and leading companies to further increase savings. Meanwhile, spending on further digitalising and “greening” the economy, as reflected in available investment data, has accelerated throughout the pandemic. Investment opportunities in these areas are considerable, and so are the challenges, which are mainly related to financing, regulation and incentives.
- JEL Code:
- D25,E3,E22,Q55
- 2 August 2022
-
Weekly financial statementAnnexes
- 2 August 2022
-
Weekly financial statement - Commentary
- 2 August 2022
-
Working Paper Series - Issue No. 2695Details
- Abstract:
- The investment fund sector, the largest component of the non-bank financial system, is growing rapidly and the economy is becoming more reliant on investment fund financial intermediation. This paper builds a dynamic stochastic general equilibrium model with banks and investment funds. Without regulation, investment funds hold insuÿcient amounts of liquid bank deposits and must sell bonds when hit by large redemptions. Even when accounting for side effects related to a reduction of deposits held by households, a macroprudential liquidity requirement improves welfare by reducing bond liquidation and by increasing macroeconomic resilience to financial shocks as in March 2020.
- JEL Code:
- E44,G18,G23
- 2 August 2022
-
Working Paper Series - Issue No. 2694Details
- Abstract:
- Central banks are increasingly reaching out to the general public to motivate and explain their monetary policy actions. One major aim of this outreach is to guide inflation expectations; another is to ensure accountability and create trust. This article surveys a rapidly-growing literature on central bank communication with the public. We first discuss why and how such communication is more challenging than communicating with expert audiences. Then we survey the empirical evidence on the extent to which this new outreach does in fact affect inflation expectations and trust. On balance, we see some promise in the potential to inform the public better, but many challenges along the way.
- JEL Code:
- D12,D84,E52,E58,G53
- 2 August 2022
-
MFI interest rate statistics
- 2 August 2022
-
Economic Bulletin - BoxEconomic Bulletin Issue 5, 2022Details
- Abstract:
- This box provides a quantitative analysis of the euro area fiscal support measures introduced in response to the war in Ukraine, including measures to compensate for high energy prices, and provides estimates for the impact of this support on growth and inflation over the period 2022-24.
- JEL Code:
- E62,J3,H55
- 2 August 2022
-
Economic Bulletin - ArticleEconomic Bulletin Issue 5, 2022Details
- Abstract:
- In the digital age, innovation in retail payments is influencing payment choice and transforming the payment landscape. However, survey evidence indicates that for the largest share of transactions at the point of sale euro area citizens choose to pay in cash, and some of them have no other payment option. It is a responsibility of central banks to ensure adequate access to cash to guarantee consumers’ freedom to choose their method of payment and to prevent financial exclusion. This article describes the situation as regards access to cash in the euro area and the ongoing work by the Eurosystem to ensure that access to cash remains adequate.
- JEL Code:
- E58,E41,R12,G21
- Network:
- Eurosystem Research Network on Cash (EURECA)
- 1 August 2022
-
Working Paper Series - Issue No. 2693Details
- Abstract:
- The holy grail of cross-border payments is a solution allowing cross-border payments to be immediate, cheap, universal, and settled in a secure settlement medium. The search for such a solution is as old as international commerce and the implied need to pay. This paper describes current visions how to eventually find this holy grail within the next decade, namely through (i) modernized correspondent banking; (ii) emerging cross-border FinTech solutions; (iii) Bitcoin; (iv) global stablecoins; (v) interlinked instant payment systems with FX conversion layer; (vi) interlinked CBDC with FX conversion layer. For each, settlement mechanics are explained, and an assessment is provided on its potential to be the holy grail of cross-border payments. Several solutions are suitable for improving cross-border payments significantly, and some could even be the holy grail.
- JEL Code:
- E42,E58,F31
- 1 August 2022
-
Working Paper Series - Issue No. 2692Details
- Abstract:
- Overlapping portfolios constitute a well-recognised source of risk, providing a channel for financial contagion induced by the market price impact of asset deleveraging. We introduce a novel method to assess the market price impact on a security-by-security basis from historical daily traded volumes and price returns. Systemic risk within the euro area financial system of banks and investment funds is then assessed by considering contagion between individual institutions’ portfolio holdings under a severe stress scenario. As a result, we show how the bias of more homogeneous estimation techniques, commonly employed for market impact, might lead to loss estimates that are more than twice as large as losses estimated with heterogeneous price impact parameters. Another new feature in this work is the application of a price-at-risk measure instead of the average market price impact to evaluate the tail risk of possible market price movements in scenarios of different severity. Our results also show that system-level losses at the tail can be three times higher than average losses using the same scenario.
- JEL Code:
- G01,G12,G17,G23,G32
- 1 August 2022
-
€STR Transparency on errors
- 1 August 2022
-
Economic Bulletin - BoxEconomic Bulletin Issue 5, 2022Details
- Abstract:
- Oil prices spiked in the immediate aftermath of Russia’s invasion of Ukraine and have been volatile ever since. As the current increase in oil prices mainly reflects supply-side factors, it could also affect potential output. This box uses several approaches to assess the channels through which oil price hikes have an impact on potential output and to estimate the possible magnitude of the impact of the current shock. The quantitative estimates proposed should be regarded with caution given the current volatility in the price of a barrel of Brent crude oil and the uncertainty surrounding the amplitude of the shock, which will depend on how the conflict develops.
- JEL Code:
- E22,E31,E32,Q41
- 1 August 2022
-
Economic Bulletin - BoxEconomic Bulletin Issue 5, 2022Details
- Abstract:
- This box uses the ECB Consumer Expectations Survey (CES) to assess euro area household saving behaviour since the start of the coronavirus (COVID-19) pandemic. Most respondents reported that during the pandemic they were not able to increase their savings. Those that were able to do so reported that COVID-19-related restrictions/fear of infection and precautionary motives were the most important reasons for increasing their savings. In March 2021 the bulk of the savings accumulated during the pandemic were not expected to be spent until at least the spring of 2022. Most respondents expected to return to, but not exceed, their pre-COVID-19 levels of consumption as soon as pandemic restrictions were relaxed, suggesting limited scope for widespread pent-up demand during the recovery. Pandemic-related savings were concentrated among higher-income households with a relatively low exposure to energy-intensive expenditure. This limits the extent to which these savings are able to shield the ongoing recovery of consumption from the adverse impact of the recent surge in energy prices.
- JEL Code:
- D12,D14,E21
- 29 July 2022
-
Working Paper Series - Issue No. 2691Details
- Abstract:
- In this paper, we empirically investigate the impact of intensified competition on rating quality in the credit rating market for residential mortgage-backed securities (RMBS) in the period 2017-2020. We provide evidence that competition between large credit rating agencies (CRAs) (Moody’s and Standard & Poor’s) and newer smaller ones (Dominion Bond Rating Service Morningstar and Kroll Bond Rating Agency) creates credit rating inconsistencies in the RMBS market. While a credit rating should solely represent the underlying credit risk of a RMBS, irrespective of the competition in the market, our results show that this is not the case. When competitive pressure increases, both large and small CRAs tend to adjust their rating standards (smaller CRAs react to large CRAs and vice versa).
- JEL Code:
- G15,G21,G24,G28
- 29 July 2022
-
Working Paper Series - Issue No. 2690Details
- Abstract:
- How does contagion risk affect the business cycle? We find that the presence of contagion risk significantly alters the transmission of standard macroeconomic shocks. Relative to the first-best equilibrium, the contagion externality significantly reduces the response of output to a technology shock. We also argue that the magnitude of the trade-off between health and the economy crucially depends on how the probability of infection is specified. If the probability of infection only depends on agents’ endogenous choices, a weaker trade-off emerges. In such a framework, and relative to the laissez-faire equilibrium, suboptimal policies such as zero COVID strategies, health insurance, or mandatory testing substantially attenuate recessions that are caused by epidemics. Therefore, policies primarily aimed at preserving public health do not necessarily come at the cost of deeper recessions.
- JEL Code:
- E1,H0,I1
- 29 July 2022
-
Other publicationDetails
- Subtitle:
- Selected validation checks performed in AnaCredit datasets
- 29 July 2022
-
Environmental StatementAnnexes
- 28 July 2023
-
Environmental Statement
- 16 August 2024
-
Environmental Statement
- 29 July 2022
- 29 July 2022
- 29 July 2022
-
Survey on credit terms and conditions in euro-denominated securities financing and OTC derivatives marketsAnnexes
- 29 July 2022
- 29 July 2022
-
Other publication
- 29 July 2022
-
InterviewDetails
- Subtitle:
- Interview with Luis de Guindos, Vice-President of the ECB, conducted by Tõnis Oja on 25 July
- 29 July 2022
-
Press releaseRelated
- 28 July 2022
-
Working Paper Series - Issue No. 2689Details
- Abstract:
- We provide evidence on the estimated effects of digital euro news on bank valuations and lending and find that they depend on deposit reliance and design features aimed at calibrating the quantity of CBDC. Then, we develop a quantitative DSGE model that replicates such evidence and incorporates key selected mechanisms through which CBDC issuance could affect bank intermediation and the economy. Under empirically-relevant assumptions (i.e., central bank collateral requirements and imperfect substitutability across CBDC, cash and deposits), the issuance of CBDC yields non-trivial trade-offss and effects through an expansion of the central bank balance sheet and profits. The issuance of CBDC exerts a smoothing effect on lending and real GDP by stabilizing deposit holdings. Such "stabilization effect" improves the well-known liquidity services/disintermediation trade-off induced by CBDC and permits to rank different types of CBDC rules according to individual and social preferences. Welfare-maximizing CBDC policy rules are effective in mitigating the risk of bank disintermediation and induce significant welfare gains.
- JEL Code:
- E42,E58,G21
- 28 July 2022
-
Working Paper Series - Issue No. 2688Details
- Abstract:
- We study supervisory interventions in cross-border banks under different institutionalarchitectures in a model in which a bank may provide voluntary support to animpaired subsidiary using resources from a healthy subsidiary. While supranationalarchitecture permits voluntary support, national architecture gives rise to inefficientring-fencing of a healthy subsidiary when there is high correlation between the subsidiaries’assets. The enhanced cross-subsidiary support allowed by a supranational architectureaffects banks’ risk-taking, leading to a convergence of the default risk amongcross-border banks with heterogeneous fundamentals. Finally, supranational architecturereduces the expected deposit insurance costs for banks with riskier fundamentals,but not for safer banks even when it could still be aggregate welfare improving.
- JEL Code:
- D8,G11,G2
- Network:
- ECB Lamfalussy Fellowship Programme
- 28 July 2022
-
The ECB BlogDetails
- Subtitle:
- Non-immigrants in the euro area are on average better off than immigrants in terms of wages and wealth. These differences can cause immigrants to react differently to economic shocks and changing financial conditions. As economic inequality matters for monetary policy transmission, the ECB Blog takes a closer look.
Related- 19 October 2022
- 14 September 2022
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The ECB Blog
- 27 July 2022
-
Occasional Paper Series - Issue No. 298Details
- Abstract:
- The US economy has endured an exceptionally severe recession caused by the measures put in place to contain the spread of COVID-19. This occasional paper assesses the impact of this crisis on key labour market variables, such as (un-)employment, wages and productivity, and highlights the differences versus past recessions, with an emphasis on the global financial crisis (GFC). It also presents a comparison of developments in certain key variables between the euro area and the United States, and it discusses the outlook in the United States for the ongoing recovery.
- JEL Code:
- J20,J30,J60
- 27 July 2022
-
Occasional Paper Series - Issue No. 297Details
- Abstract:
- This paper looks at the macroeconomic impact of the two policies proposed by ECB Banking Supervision to tackle the high share of non-performing loans (NPLs) on the balance sheets of euro area banks. The first is the coverage expectations for new NPLs set out in the Addendum to the ECB’s NPL Guidance, which aim to prevent the build-up of new NPLs, and the second is the coverage expectations for legacy NPLs, which target the reduction of already existing stocks of NPLs. The impact assessment of the package is analysed via a semi-structural model, the Banking Euro Area Stress Test (BEAST). The coverage expectations for NPLs are found to be effective in reducing banks’ NPLs. The phase-in of the policies can temporarily reduce bank profitability owing to increased loan loss provisioning targets. However, over a longer time horizon, lower NPL ratios reduce uncertainty and enable banks to access cheaper funding in the markets, ultimately benefiting lending and output growth. Furthermore, the coverage expectations can also moderately but persistently reduce procyclicality in the banking system.
- JEL Code:
- E37,E58,G21,G28
- 27 July 2022
-
Euro area economic and financial developments by institutional sector (full)
- 27 July 2022
-
Monetary developments in the euro areaAnnexes
- 27 July 2022
-
Monetary developments in the euro area
- 27 July 2022
-
Research Bulletin - Issue No. 98Details
- Abstract:
- Labour market developments are important drivers of the business cycle and are therefore closely watched by monetary policymakers. One process with significant macroeconomic ramifications are wage negotiations, where workers and employers bargain over the surplus income generated by an employment relationship. Bargaining power determines how this surplus is split between negotiating parties. However, it is unobserved, and can be driven by a number of factors. We exploit information about key events in Germany that are relevant for wage negotiations, such as labour strikes and the introduction of a minimum wage, to pinpoint changes in bargaining power. We find that such wage bargaining “shocks” are important drivers of unemployment and inflation, that their effect on wages is almost fully reflected in prices, and that they reduce the vacancy rate and increase firms' profits and the labour share of income in the short run, but not in the long run.
- JEL Code:
- J2,J3,E32,C32
- 26 July 2022
-
Weekly financial statementAnnexes
- 26 July 2022
-
Weekly financial statement - Commentary
- 26 July 2022
-
Working Paper Series - Issue No. 2687Details
- Abstract:
- Distributional accounts for households enable measurement, study developments andidentify drivers of inequality. Distributional information on households’ wealth is availablefrom the Household Finance and Consumption Survey only for three points in time (2009 –2018), while aggregates are available quarterly. This paper presents a novel methodology forderiving quarterly distributional national wealth by (i) improving the alignment of surveyfieldwork periods with the national accounts’ dates; (ii) correcting for differences in severalconcepts; (iii) estimating missing wealthy households; (iv) developing time series; and (v)computing euro area aggregates. This paper finds an increase in the net wealth Gini of mosteuro area countries since 2009; that the richest 1% holds 28% of total net wealth, while thebottom 50% holds 4%; and that the net wealth of the top 1% has grown by almost 50%,compared to 28% for the remaining 99%, with a decrease in the bottom 20%.
- JEL Code:
- C46,D31,E27,G51,N34
- 26 July 2022
-
Working Paper Series - Issue No. 2686Details
- Abstract:
- Fulfilling the commitments embedded in the Paris Agreement requires a climate-technologyrevolution. Patented innovation of low-carbon technologies is lower in the EU than in selectedpeers, and very heterogeneous across member states. We motivate this fact with anendogenous model of directed technical change with government policy and financialmarkets. Variations in carbon taxes, R&D investment, and venture capital investment explaina large share of the variation in green patents per capita in the data. We discuss implicationsfor policy, concluding that governments can play a catalytic role in stimulating greeninnovation while the role of central banks is limited.
- JEL Code:
- E5,G1,O4,Q5
- Network:
- Discussion papers
- 26 July 2022
-
Discussion Paper Series - Issue No. 19Details
- Abstract:
- Fulfilling the commitments embedded in the Paris Agreement requires a climate-technologyrevolution. Patented innovation of low-carbon technologies is lower in the EU than in selectedpeers, and very heterogeneous across member states. We motivate this fact with anendogenous model of directed technical change with government policy and financialmarkets. Variations in carbon taxes, R&D investment, and venture capital investment explaina large share of the variation in green patents per capita in the data. We discuss implicationsfor policy, concluding that governments can play a catalytic role in stimulating greeninnovation while the role of central banks is limited.
- JEL Code:
- E5,G1,O4,Q5
- 26 July 2022
-
Press release
- 26 July 2022
-
Other publication
- 26 July 2022
- 25 July 2022
-
Working Paper Series - Issue No. 2685Details
- Abstract:
- This paper analyzes monetary policy in a model with a potential unanchoring of inflation expectations. The degree of unanchoring is given by how sensitively the public’s long-run inflation expectations respond to inflation surprises. I find that optimal policy moves the interest rate aggressively when expectations unanchor, allowing the central bank to accommodate inflation fluctuations when expectations are well-anchored. Furthermore, I estimate the model-implied relationship that determines the extent of unanchoring. The data suggest that the expectations process is nonlinear and asymmetric: expectations respond more sensitively to large or downside surprises than to smaller or upside ones.
- JEL Code:
- E52,E71,D84
- 25 July 2022
-
Working Paper Series - Issue No. 2684Details
- Abstract:
- This paper quantifies the pass-through of a US dollar appreciation on trade variables and domestic financial conditions in a panel of 34 countries. Pass-through coefficients are highly shock-dependent: if the appreciation is driven by a US expansionary shock, the positive effects of stronger global demand - the “real” channel dominate the negative effects of a stronger dollar - the “exchange rate” channel. As a result, a positive US demand (supply)-drive appreciation expands global trade and stock valuations up to 2.2 (2.5) and 8% (15%) respectively, while if the appreciation is driven by a monetary policy shock the sign is opposite, leading to a contraction in the order of 2.5% (3%) depending on the country. The coefficients also exhibit a large degree of cross-country heterogeneity, we find that financial and trade exposure to the US, trade openness and USD invoicing shares explain up to 60% of the USD pass-through after demand and supply shocks. Cross-country differences, instead, are not explained by dollar invoicing if monetary policy or risk shocks determine USD movements. We explain this finding with the endogenous policy reaction of monetary authorities in emerging markets that stabilizes the exchange rate against the dollar and weakens the invoicing channel of dollar shocks.
- JEL Code:
- F31,F41,F44,E44,E32
- 25 July 2022
-
Survey of Monetary Analysts - Aggregate results
- 23 July 2022
-
The ECB BlogDetails
- Subtitle:
- Raising interest rates is a landmark moment on our journey towards lower inflation, writes President Christine Lagarde in The ECB Blog.
- 22 July 2022
- 22 July 2022
-
Governing Council decisions - Other decisions
- 22 July 2022
-
Working Paper Series - Issue No. 2683Details
- Abstract:
- The last few decades have been accompanied by disruptive changes to the structure ofemployment which have led to deterioration in demand for middle-skill occupations, a processknown as job polarisation. As the demand for middle-skill workers shrinks, expectationsabout households’ income through their lifetime horizon are adjusted. It is unclear whetherthese expectations can loop back into the credit system, and affect the lending behaviour ofcredit institutions, or whether this process impacts on the households’ self-assessment of theiropportunities to borrow money. In this paper, we study how the process of job polarisationaffects credit demand and supply, studying its relationship with credit constraint and creditquality.
- JEL Code:
- G51,J24,D84,O15
- 22 July 2022
-
Working Paper Series - Issue No. 2682Details
- Abstract:
- We assess whether central bank credit operations influence the size and composition of bank credit in a negative interest rate environment. We exploit confidential information from the newly established European credit registry to capture bank lending conditions and bank risk taking. For identification, we use high-frequency reactions of bank bonds around the announcement of the April 2020 recalibration of the ECB’s Targeted Longer-Term Refinancing Operations (TLTROs). We find that the credit easing measures had a strong positive effect on bank credit, even when controlling for possible confounding factors. The increase in lending was not accompanied by excessive risk-taking, especially for banks with low intermediation margin, that is, those that were poised to benefit the most from TLTROs’ borrowing rates below the interest rates on central bank reserves.
- JEL Code:
- E51,E52,G01,G21
- 22 July 2022
-
Payment instruments and systemsAnnexes
- 22 July 2022
-
Payment instruments and systems
- 22 July 2022
-
Press releaseRelated
- 22 July 2022
-
Survey of Professional Forecasters
- 22 July 2022
-
Survey of Professional ForecastersAnnexes
- 22 July 2022
Related- 22 July 2022
- 22 July 2022
-
Economic Bulletin - BoxEconomic Bulletin Issue 5, 2022Details
- Abstract:
- This box summarises the main findings from contacts between ECB staff and representatives of 71 leading non-financial companies operating in the euro area. The exchanges mainly took place between 20 and 29 June 2022. According to these contacts, overall activity developed positively in the second quarter of the year. Despite clear signs of weakening demand in some sectors, reflecting the uncertainty created by the war in Ukraine and rising inflation, the recovery in sectors benefiting from the relaxation of pandemic-related restrictions was particularly strong and generally exceeded expectations. Overall, contacts expected activity growth to slow in the coming months, with widespread uncertainty and concern surrounding the outlook after the summer. The frequency and magnitude of selling price increases remained high, as substantial increases in costs (particularly from energy and transport) were passed through the value chain. Most contacts anticipated a similar trend in selling price increases in the third quarter, but some were more hesitant in view of faltering demand, pointing to a potential for some moderation in the overall rate of increase.
- JEL Code:
- E2,E3,L2
- 22 July 2022
-
Digital Euro Investigation Phase documentAnnexes
- 22 July 2022
-
Digital Euro Investigation Phase document
- 21 July 2022
-
PodcastRelated
- 21 July 2022
-
Monetary policy statementDetails
- Subtitle:
- Christine Lagarde, President of the ECB,
Luis de Guindos, Vice-President of the ECB
- 21 July 2022
-
Press releaseRelated
- 21 July 2022
-
Monetary policy decision
- 21 July 2022
-
Combined monetary policy decisions and statementRelated
- 21 July 2022
-
Monetary policy statement
- 21 July 2022
-
Monetary policy decision
- 21 July 2022
-
Monetary policy statementDetails
- Subtitle:
- Christine Lagarde, President of the ECB,
Luis de Guindos, Vice-President of the ECB
Related- 21 July 2022
-
Combined monetary policy decisions and statement
- 21 July 2022
- 21 July 2022
-
Monetary policy decisionRelated
- 21 July 2022
-
Press release
- 21 July 2022
-
Combined monetary policy decisions and statement
- 25 August 2022
-
Monetary policy account
- 20 July 2022
-
Balance of payments (monthly)
- 19 July 2022
-
Weekly financial statementAnnexes
- 19 July 2022
-
Weekly financial statement - Commentary
- 19 July 2022
-
Euro area bank lending survey - Issue No. 2022Annexes
- 19 July 2022
-
Euro area bank lending survey - Annex
Related- 19 July 2022
-
Press release
- 19 July 2022
-
Press releaseRelated
- 19 July 2022
-
Euro area bank lending survey - Issue No. 2022
- 18 July 2022
-
Press releaseAnnexes
- 18 July 2022
-
Other publication
- 13 July 2022
-
Other publication
- 13 July 2022
-
The ECB BlogDetails
- Subtitle:
- It is our responsibility to preserve the integrity of the monetary and payment systems, write President Christine Lagarde and Executive Board member Fabio Panetta. A digital euro could play a decisive role in this endeavour.
Related- 30 November 2022
-
The ECB Blog
- 19 November 2021
-
The ECB Blog
- 14 July 2021
-
The ECB Blog
- 25 March 2021
- 2 December 2020
-
The ECB Blog
- 2 October 2020
-
The ECB Blog
- 13 July 2022
-
Working Paper Series - Issue No. 2681Details
- Abstract:
- We estimate the response of product-level retail prices to changes in the corporate tax rates paid by wholesale producers (pass-through). Under perfect competition in goods and factor markets, pass-through of corporate taxes should be zero, and their incidence mainly falls on factor prices. We use variation in tax rates across time and space in Germany, where municipalities set the local business tax once a year, to provide estimates of tax pass-through into the retail prices of more than 125,000 food and personal care products sold across Germany. By leveraging 1,058 changes in the local business tax rate between 2013 and 2017, we find that a one percentage point tax increase results in a 0.4% increase in the retail prices of goods produced by taxed _rms and purchased by consumers in the rest of Germany, who thus end up bearing a substantial share of the tax burden. This finding suggests that manufacturers may exploit their market power to shield profits from corporate taxes, complicating the analysis of the redistributive effects of tax reforms. We also explore various dimensions of heterogeneity in pass-through related to market power, including producer size, market shares, and retail store types. While producer heterogeneity does not seem to matter, the significant passthrough of corporate taxes to consumer prices in the low inflation period covered by our sample is mostly due to price changes in supermarkets and hypermarkets.
- JEL Code:
- F12,F45,E13,H71,L11
- 13 July 2022
-
Working Paper Series - Issue No. 2680Details
- Abstract:
- This paper proposes a tractable New Keynesian (NK) economy with endogenous adjustment in product quality that nests the canonical framework. Endogenous quality choice reduces the slope of the traditional NK Phillips curve and amplifies the economy’s response to productivity shocks. This leads to a less reactionary monetary policy where model misspecification of imperfectly observable quality adjustments matters more for macroeconomic stabilization than the mismeasurement of those adjustments. With no misperception of product quality by the monetary authority, the principles for optimal monetary policy are, nonetheless, unchanged as the quality extensions to the canonical NK model preserve divine coincidence.
- JEL Code:
- E31,E32,E52,E58
- 12 July 2022
-
Weekly financial statementAnnexes
- 12 July 2022
-
Weekly financial statement - Commentary
- 12 July 2022
-
Press release
- 12 July 2022
-
Working Paper Series - Issue No. 2678Details
- Abstract:
- This paper presents DSGE Nash, a toolkit to solve for pure strategy Nash equilibria of global games in macro models. Although primarily designed to solve for Nash equilibria in DSGE models, the toolkit encompasses a broad range of options including solutions up to the third order, multiple players/strategies, the use of user-de_ned objective functions and the possibility of matching empirical moments and IRFs. When only one player is selected, the problem is re-framed as a standard optimal policy problem. We apply the algorithm to an open-economy model where a commodity importing country and a monopolistic commodity producer compete on the commodities market with limits to entrance. If the commodity price becomes relevant in production, the central bank in the commodity importing economy deviates from the _rst best policy to act strategically. In particular, the monetary authority tolerates relatively higher commodity price volatility to ease barriers to entry in commodity production and to limit the market power of the dominant exporter.
- JEL Code:
- C63,E32,E61
- 11 July 2022
-
Digital Euro Investigation Phase document
- 11 July 2022
-
Macroprudential Bulletin - Focus - Issue No. 18Details
- Abstract:
- This article describes the main features and risks of decentralised finance (DeFi), focusing in particular on similarities and differences between DeFi and traditional finance. While the financial services provided through DeFi mainly replicate those of traditional financial services but within the crypto-asset ecosystem, they are provided in a novel way that relies on automated protocols and cuts out centralised intermediaries. The article explains how this novel method of service provision entails specific financial stability risks and regulatory challenges.
- JEL Code:
- G23,G28,G01
- 11 July 2022
-
Macroprudential Bulletin - Article - Issue No. 18Details
- Abstract:
- Some crypto-assets have a significant carbon footprint and are estimated to consume a similar amount of energy each year to individual countries like Spain, the Netherlands or Austria. As the mining and expansion of these crypto-assets are fully dependent on energy supply, their valuation is particularly vulnerable to jurisdictions’ climate policies. Increasing financial exposures to such crypto-assets are therefore likely to contribute to increased transition risk for the financial system. This article provides an overview of the estimated carbon footprint of certain crypto-assets such as bitcoin and its causes. It also discusses the primary policy role of public authorities, which need to evaluate whether the outsized carbon footprint of certain crypto-assets undermines their green transition commitments. Finally, it analyses policy options for prudential standard-setters and the need for climate-related considerations in crypto-investors’ practices.
- JEL Code:
- G28
- 11 July 2022
-
Macroprudential Bulletin - Article - Issue No. 18Details
- Abstract:
- Stablecoins are in the spotlight due to their rapid growth, increasing global use cases and potential financial risk contagion channels. This article analyses the role played by stablecoins within the wider crypto-asset ecosystem and finds that some existing stablecoins are already critical to liquidity in crypto-asset markets. This could have wide-ranging implications for crypto-asset markets if a large stablecoin were to fail and could also have contagion effects if crypto-assets’ interlinkages with the traditional financial system continue rising. To date, the speed and cost of stablecoin transactions, as well as their redemption terms and conditions, have fallen short of what is required of practical means of payment in the real economy. Their growth, innovation and increasing use cases, coupled with their potential contagion channels to the financial sector, call for the urgent implementation of effective regulatory, supervisory and oversight frameworks before significant further interconnectedness with the traditional financial system occurs.
- JEL Code:
- E42,G13,G18,G28
- 11 July 2022
-
Macroprudential Bulletin - Article - Issue No. 18Details
- Abstract:
- Financial stability risks stemming from crypto-assets are rising, and the crypto-asset ecosystem has become more complex and interconnected. This issue of the Macroprudential Bulletin takes a deep dive into the risks and policy implications of several segments of the crypto-asset market. One central element is stablecoins, whose growth, innovation and increasing global use cases call for the urgent implementation of appropriate regulatory, supervisory and oversight frameworks before significant further interconnectedness with the traditional financial system occurs. Another fast-growing segment within the crypto ecosystem is decentralised finance (DeFi), whose novel way of providing financial services without relying on centralised intermediaries entails specific financial stability risks and regulatory challenges. Lastly, this issue highlights the climate transition risk for the financial sector stemming from the significant carbon footprint of certain crypto-assets like bitcoin and proposes potential measures that can be taken by authorities..
- JEL Code:
- E42,G18,G23,G28
- 11 July 2022
- 8 July 2022
-
Letters to MEPs
- 8 July 2022
- 8 July 2022
-
The ECB BlogDetails
- Subtitle:
- The ECB is reducing the carbon footprint in its portfolio and pushing banks to better manage climate risks. Within our mandate, we incorporate climate change considerations into our monetary policy and banking supervision, say Frank Elderson and Isabel Schnabel.
- 8 July 2022
- 7 July 2022
-
Monetary policy accountRelated
- 9 June 2022
-
Monetary policy decision
- 7 July 2022
-
Economic Bulletin - BoxEconomic Bulletin Issue 5, 2022Details
- Abstract:
- This box analyses the selling price expectations among euro area firms based on the results from the most recent Survey on the Access to Finance of Enterprises in the euro area. To better understand the price-setting behaviour of firms in a context of high inflationary pressures, the April 2022 Survey included additional questions on the selling price expectations of firms and factors influencing their pricing decisions. By providing the perspective of firms, this box sheds light on the current inflation outlook.
- JEL Code:
- C83,D22,D84,L11
- 6 July 2022
- 6 July 2022
- 6 July 2022
- 6 July 2022
-
Weekly financial statementAnnexes
- 6 July 2022
-
Weekly financial statement - Commentary
- 6 July 2022
-
Digital Euro Investigation Phase documentAnnexes
- 6 July 2022
-
Digital Euro Investigation Phase document
- 6 July 2022
-
Digital Euro Investigation Phase document
- 6 July 2022
-
Digital Euro Investigation Phase document
- 5 July 2022
-
Digital Euro Investigation Phase documentAnnexes
- 5 July 2022
-
Digital Euro Investigation Phase document
- 5 July 2022
-
Digital Euro Investigation Phase document
- 25 July 2022
-
Digital Euro Investigation Phase document
- 5 July 2022
-
Euro area economic and financial developments by institutional sector (early)
- 5 July 2022
-
Euro money market statistics
- 5 July 2022
-
Balance of payments (quarterly)
- 5 July 2022
-
MFI interest rate statistics
- 4 July 2022
-
SpeechDetails
- Subtitle:
- Remarks by Luis de Guindos, Vice-President of the ECB, at the Frankfurt Euro Finance Summit
- 4 July 2022
-
Working Paper Series - Issue No. 2677Transition versus physical climate risk pricing in European financial markets: a text-based approachDetails
- Abstract:
- We examine the existence of physical and transition climate risk premia in euro areaequity markets. To do so, we develop two novel physical and transition risk indicators, basedon text analysis, which are then used to gauge the presence of climate risk premia. Resultssuggest that climate risk premia for both, transition and physical climate risk, have increasedsince the time of the Paris Agreement. In addition, we investigate which metrics may be usedby investors to proxy a firm’s exposure to either physical or transition risk. To this end, weconstruct portfolios according to the most common firm-specific climate metrics and estimatethe sensitivity of these portfolios to our risk indicators. We compare results from these firmlevelproxies to much simpler sectoral classifications to see if investors may simply pigeonholefirms into the industry they operate in. We find that firm level information appears to beused as a gauge for transition risk, in particular since 2015, whereas sectoral classificationsappear insufficient. However, sectoral classification may be employed to broadly gauge firms’exposures to physical risk.
- JEL Code:
- C58,G12,G14,G28,Q51
- 4 July 2022
-
Letters to MEPsRelated
- 4 July 2022
- 4 July 2022
-
Press releaseAnnexes
- 4 July 2022
-
Press release
Related- 4 July 2022
- 4 July 2022
-
Survey of Monetary Analysts
- 2 July 2022
-
SpeechDetails
- Subtitle:
- Presentation by Isabel Schnabel, Member of the Executive Board of the ECB, at Petersberger Sommerdialog
- 1 July 2022
-
SpeechDetails
- Subtitle:
- Keynote speech by Fabio Panetta, Member of the Executive Board of the ECB, at the European Parliament’s Innovation Day “The EU in the world created by the Ukraine war”
- 1 July 2022
-
Working Paper Series - Issue No. 2676Details
- Abstract:
- Since most macroeconomic data are revised after the initial release both researchers andpolicy-makers have no choice rather than recognising and understanding the revisions. Thispaper analyses revisions to the fiscal data in the euro area, also by contrasting them with the’better-understood’ macro revisions. Concretely, the study verifies whether fiscal revisionsfulfil requirements to treat them as well-behaved. To this end, we construct a fiscal quarterlyreal-time dataset, which contains quarterly releases of Government Finance Statistics andwhich is supplemented by macro variables from Main National Accounts. Fiscal revisionsdo not satisfy desirable properties expected from well-behaved revisions. In particular, theytend to have a positive bias, they exhibit a big dispersion and they are largely predictable.Also, they are similar to macro revisions, in particular since 2014, which contradicts theoften heard view about fiscal data being subject to particularly large revisions.
- JEL Code:
- C80,E62
- 1 July 2022
-
Working Paper Series - Issue No. 2675Details
- Abstract:
- Digitalisation can be described as a sequence of technology and supply shocks which affect the economy through employment and labour markets, productivity and output, and competition and market structure. This paper focuses on how digitalisation - the process of diffusion of digital technologies - is affected by institutions and governance. It discusses a number of theoretical mechanisms and empirical evidence for different sets of European and other countries. The results indicate that a higher quality of institutions is usually associated with both a greater speed of diffusion and a greater spread of digital technologies. The results also suggest that there are large, policy-relevant differences in the diffusion process depending on the level of development as well as the state of technological change of a country.
- JEL Code:
- E02,O11,O31,O33,O57
- 1 July 2022
- 30 June 2022
-
Working Paper Series - Issue No. 2674Details
- Abstract:
- This paper studies the bilateral drivers of mergers and acquisitions (M&As) between European banks. Two findings document that banks use M&A as a device to leverage their expertise rather than to diversify. (i) Following the literature on matrimonial matching by using a binary logit model, the paper examines how the structure of acquiring banks in terms of geographical location (headquarters and subsidiaries) influences the choice of targeted banks for an M&A transaction. It finds that banks favour domestic expansion over international diversification. (ii) The paper investigates how the business model of acquiring banks determines their selection of targeted banks. Very often, banks tend to target counterparts with the same business model or, to a lesser extent, those with the same business model as one of their subsidiaries.
- JEL Code:
- G21,G34,L22
- 30 June 2022
-
Working Paper Series - Issue No. 2673Details
- Abstract:
- Using a novel quarterly dataset on debt financing of non-financial corporations, this paper provides the first empirical evaluation of the relative importance of loan and market-based finance (MBF) supply shocks on business cycles in the euro area as a whole and in its five largest countries. In a Bayesian VAR framework, the two credit supply shocks are identified via sign and inequality restrictions. The results suggest that both loan supply and MBF supply play an important role for business cycles. For the euro area, the explanatory power of the two credit supply shocks for GDP growth variations is comparable. However, there is heterogeneity across countries. In particular, in Germany and France, the explanatory power of MBF supply shocks exceeds that of loan supply shocks. Since MBF is mostly provided by non-bank financial intermediaries, the findings suggest that strengthening their resilience — such as through an enhanced macroprudential framework — would support GDP growth.
- JEL Code:
- C32,E32,E44,E51,G2
- 29 June 2022
-
Monetary developments in the euro areaAnnexes
- 29 June 2022
-
Monetary developments in the euro area
- 28 June 2022
-
Weekly financial statementAnnexes
- 28 June 2022
-
Weekly financial statement - Commentary
- 28 June 2022
-
SpeechDetails
- Subtitle:
- Speech by Christine Lagarde, President of the ECB, at the ECB Forum on Central Banking 2022 on “Challenges for monetary policy in a rapidly changing world” in Sintra, Portugal
- 27 June 2022
-
Working Paper Series - Issue No. 2672Details
- Abstract:
- This paper studies the long-run evolution of bank risk and its links to the macroeconomy. Using data for 17 advanced economies, we show that the riskiness of bank assets declined materially between 1870 and 2016. But even though bank assets have become safer, the losses on these assets are associated with increasingly large output gaps. Before 1945, bank asset returns had no excess predictive power for future economic activity, while after 1945 they have outperformed non-financials as a predictor of GDP. We provide evidence linking this increasing connectedness between banks and the macroeconomy to secular increases in financial and macroeconomic leverage.
- JEL Code:
- G01,G15,G21,E44,N20,O16
- Network:
- ECB Lamfalussy Fellowship Programme
- 27 June 2022
-
Working Paper Series - Issue No. 2671Details
- Abstract:
- We build a model to simulate how the euro area market-based financial system may function under stress. The core of the model is a set of representative agents reflecting key economic sectors, which interact in asset, funding, and derivatives markets and face solvency and liquidity constraints on their behaviour. We illustrate the model's behaviour in a two-layer approach. In Layer 1 the deterioration in the outlook for the corporate sector triggers portfolio reallocation by the model's agents. Layer 2 adds a rating downgrade shock where a fraction of investment grade corporate bonds is downgraded to high yield, which creates further rebalancing pressure and price movements. The model predicts (i) asset flows (buying and selling of marketable securities) across agents and (ii) balance sheet losses. It also provides quantitative evidence on equilibrium effects of the macroprudential regulation of nonbanks, which we illustrate by varying investment fund cash buffers.
- JEL Code:
- G17,G21,G22,G23
- 27 June 2022
- 27 June 2022
- 24 June 2022
-
Governing Council decisions - Other decisions
- 24 June 2022
-
Research Bulletin - Issue No. 97Details
- Abstract:
- Throughout the world, the global financial crisis fostered the design and adoption of macroprudential policies to safeguard the financial system. This raises important questions for monetary policy, which, by contrast, primarily focuses on maintaining price stability. What, if any, is the relationship between (conventional) monetary policy and macroprudential policy? In particular, how does the effectiveness of macroprudential policies influence the conduct of monetary policy? This article reviews recent theoretical and empirical research addressing these questions. The main conclusion is that monetary policy can also perform macroprudential functions, but it does so by deviating from its focus on price stability. The quantification of this trade-off remains an exciting question.
- JEL Code:
- E31
- Network:
- Research Task Force (RTF)
- 23 June 2022
-
Forum on Central Banking - Conference proceedings - Issue No. 2021
- 23 June 2022
- 23 June 2022
-
Economic Bulletin
- 23 June 2022
-
Economic Bulletin - ArticleEconomic Bulletin Issue 4, 2022Details
- Abstract:
- The debt financing structure of euro area firms has broadened since the introduction of the euro. While bank loans still account for a major share of corporate debt, euro area firms have increasingly resorted to bond financing over the past decade and a half. Empirical evidence suggests that this shift in firms’ debt financing structures affects the transmission of shocks to the euro area economy. While corporate bonds and loans typically respond in a similar procyclical manner to exogenous changes in business investment, bond issuance tends to mildly cushion the credit contraction resulting from adverse supply shocks. The evidence also indicates that a higher share of bond financing strengthens the transmission of monetary policy measures that primarily operate via longer-term yields, whereas short-term rate changes tend to exert stronger real effects in economies that are more dependent on loans. From a broader perspective, the higher share of bond financing renders euro area firms more resilient against crises concentrated in the banking sector. However, this benefit may be counteracted by a rising presence of more vulnerable firms in the corporate bond market and by the structural vulnerabilities of non-bank financial intermediaries, which are significant investors in that market.
- JEL Code:
- E44,E51,E52
- 23 June 2022
-
Economic Bulletin - BoxEconomic Bulletin Issue 4, 2022Details
- Abstract:
- This box describes the ECB’s liquidity conditions and monetary policy operations during the first and second maintenance periods of 2022 from 9 February to 19 April 2022.
- JEL Code:
- E40,E52,E58
- 23 June 2022
-
Economic Bulletin - BoxEconomic Bulletin Issue 4, 2022Details
- Abstract:
- Russia’s invasion of Ukraine has hit economic confidence and increased uncertainty in the euro area. This box illustrates how the increased uncertainty is being transmitted to the economy, adopting a two-step approach. In the first step, the uncertainty shock is identified using a structural vector autoregression model with sign and narrative restrictions. In the second step, the identified shock is used to compute losses in domestic demand, employing local projection methods. The box shows that the uncertainty shock witnessed in the period to April will have a material adverse impact on domestic demand, estimated to be larger for business investment than for consumption. Across sectors, the effect is estimated to be larger for manufacturing than for services and larger for durable goods than for non‑durables.
- JEL Code:
- E21,E32
- 22 June 2022
-
Economic Bulletin - BoxEconomic Bulletin Issue 4, 2022Details
- Abstract:
- This box assesses the extent to which current private sector forecasts point to expectations of stagflation in the euro area reminiscent of the stagflation episode in the 1970s. Stagflation refers to a protracted period of flat or negative growth combined with high or increasing inflation, as witnessed in the main advanced economies in the 1970s. Private forecasters do not currently envisage a period of stagflation for the euro area.
- JEL Code:
- E20,E31,E32,N14
- 22 June 2022
-
Economic Bulletin - BoxEconomic Bulletin Issue 4, 2022Details
- Abstract:
- This box summarises the findings of a survey of leading firms on the impact of climate change and related measures to green the economy on business, and thus on activity and prices. The survey responses indicate that during the transition to a net-zero economy large companies anticipate significantly higher investment, input costs and price pressures, as well as changes to production and market structures. However, only a small share of respondents expect a significant impact on investment, input cost and prices after the transition. As regards the challenges involved, firms emphasise issues related to the availability of new clean technologies and inputs, followed by concerns about costs and regulation. Firms expect physical risks to have an impact in particular on the agricultural, construction and transport sectors, and on firms in the manufacturing sector with vulnerable supply chains.
- JEL Code:
- C83,M21,E3,Q5
- 22 June 2022
-
SpeechDetails
- Subtitle:
- Keynote speech by Frank Elderson, Member of the Executive Board of the ECB and Vice-Chair of the Supervisory Board of the ECB, 10th Annual Conference on Bank Steering & Bank Management at the Frankfurt School of Finance & Management
- 21 June 2022
-
Weekly financial statementAnnexes
- 21 June 2022
-
Weekly financial statement - Commentary
- 21 June 2022
-
Working Paper Series - Issue No. 2670Details
- Abstract:
- We identify the effect of climate change-related regulatory risks on credit real-location. Our evidence suggests that effects depend borrower's region. Following an increase in salience of regulatory risks, banks reallocate credit to US frms that could be negatively impacted by regulatory interventions. Conversely, in Europe, banks lend more to firms that could benefit from environmental regulation. The effect is moderated by banks' own loan portfolio composition. Banks with a portfolio tilted towards firms that could be negatively a affected by environmental policies increasingly support these firms. Overall, our results indicate that financial implications of regulation associated with climate change appear to be the main drivers of banks' behavior.
- JEL Code:
- G21,Q51,Q58
- 21 June 2022
-
Occasional Paper Series - Issue No. 296Details
- Abstract:
- The euro area, like many other advanced economies, has entered an era of drastic demographic change. Without appropriate policy responses, population ageing in the euro area is posing formidable challenges for potential growth, monetary policy and public finances. This paper examines – from a central bank’s perspective – the macroeconomic and fiscal effects of population ageing in the euro area and looks at the main challenges ahead in the next decades. Total population in the euro area is projected to decline as of around 2035, while the old-age dependency ratio will rise strongly in the coming 15 years, putting additional burden on pension systems. The analysis in the paper finds that the demographic changes in the euro area present a drag on potential growth, mainly through labour supply and productivity growth – similarly to developments in Japan, which is ahead of the euro area in terms of population ageing. Precautionary savings may be higher, and the natural rate of interest lower, while the effect on trend inflation and wages are not obvious. Population ageing is posing a burden on fiscal policy, through upward pressure on pension spending and adversely affecting the tax bases and the structure of public revenues. Thus, it poses significant challenges for fiscal sustainability, limits fiscal policy space and effectiveness. To safeguard against the adverse economic and fiscal consequences of population ageing, there is a need for fiscal buffers, improved quality of public finance and structural reforms.
- JEL Code:
- E24,E52,E62,J11,J21
- 21 June 2022
-
Balance of payments (monthly)
- 21 June 2022
-
T2S financial statement
- 21 June 2022
-
Economic Bulletin - ArticleEconomic Bulletin Issue 4, 2022Details
- Abstract:
- Record-high energy price increases at the end of 2021 and beginning of 2022 put significant pressures on the purchasing power of consumers. These increases followed a marked decline in energy prices at the onset of the coronavirus (COVID-19) pandemic. While the initial increase in energy prices from the summer of 2020 was mainly driven by the recovery in energy demand following the easing of lockdown measures after the first wave of the pandemic, the subsequent price rally during 2021 was also significantly affected by supply-side issues. This development was aggravated in early 2022 by the Russian invasion of Ukraine. The increase in European gas prices since the summer of 2021 has been particularly sharp, reflecting a combination of supply and demand factors that left European gas inventories at historically low levels ahead of the winter season and the gas market vulnerable to supply and demand uncertainty, including from escalating geopolitical tensions. As a result, consumer gas prices and consumer electricity prices (driven by gas prices) played an increasingly important role in developments in HICP energy and were also accompanied by unprecedented cross-country heterogeneity in energy price developments.
- JEL Code:
- Q43,E31,Q02,L90
- 21 June 2022
-
Economic Bulletin - BoxEconomic Bulletin Issue 4, 2022Details
- Abstract:
- In this box, we present a new measure of domestic inflation for the euro area that takes into account the import intensity of HICP items. For this new indicator, the import intensities of HICP items are derived using information from national accounts and input-output tables. The HICP items with a relatively low import intensity are subsequently aggregated to a “Low IMport Intensity” (LIMI) inflation indicator. Differently to the literature, an empirical assessment is used to determine an optimal threshold for these import intensities. While the ECB’s inflation target is formulated in terms of headline inflation, the concept of domestic inflation is of analytical relevance to monetary policy, as it features prominently in the monetary policy transmission mechanism. Common indicators of domestic inflation, such as the GDP deflator or core inflation, either include elements that are not directly related to consumer prices or exclude volatile components that may nonetheless be driven by domestic factors. The LIMI inflation indicator can complement the information provided by these other indicators in an assessment of the underlying inflationary pressures.
- JEL Code:
- E32,J11,J21
- 21 June 2022
-
Economic Bulletin - BoxEconomic Bulletin Issue 4, 2022Details
- Abstract:
- This box examines recent developments in euro area food inflation and the channels through which it is being affected by the Russia-Ukraine war. Euro area HICP food inflation reached a historical high in April 2022. The rise has been driven primarily by increasing global energy and food commodity prices since the second half of 2021. The war and its repercussions are hindering the import of energy and food commodities in the euro area and contributing to further increases in global prices. While the European Union is mostly self-sufficient in terms of agricultural products, producing more than it consumes, this is exacerbating already existing pressures in euro area food markets.
- JEL Code:
- E31,F10,F51
- 21 June 2022
-
Economic Bulletin - BoxEconomic Bulletin Issue 4, 2022Details
- Abstract:
- This box provides an overview of the impact that the war in Ukraine has had on euro area energy markets. Energy commodity and electricity prices spiked in the immediate aftermath of Russia’s invasion of Ukraine and have been highly volatile ever since. Russia supplies a considerable amount of energy to the euro area, particularly gas. The European Union introduced economic sanctions targeting the Russian energy industry, most notably the coal and oil sectors, while steps are also being taken towards becoming independent of Russian gas. After the initial price spikes, energy commodity prices moderated, owing partly to the EU’s sanctions and also helped by other policy initiatives such as historically large releases of strategic oil reserves. Higher energy commodity prices intensified the pressure on euro area consumer prices in February and March 2022, while some of this pressure was alleviated in April and May as a result of government measures.
- JEL Code:
- Q43,E31,Q02,N44
- 20 June 2022
-
SpeechDetails
- Subtitle:
- Presentation by Philip R. Lane, Member of the Executive Board of the ECB, at the Society of Professional Economists Annual Dinner
- 20 June 2022
-
SpeechDetails
- Subtitle:
- Speech by Christine Lagarde, President of the ECB, at the Hearing of the Committee on Economic and Monetary Affairs of the European Parliament
Annexes- 20 June 2022
- 20 June 2022
-
Speech
- 20 June 2022
-
Economic Bulletin - ArticleEconomic Bulletin Issue 4, 2022Details
- Abstract:
- The €STR, launched in October 2019, is the official euro-denominated risk-free benchmark interest rate. It fully replaced EONIA from January 2022, after a transition period of more than two years. The article explains what benchmark rates are, why they are important for financial markets and why the ECB needs robust and reliable benchmark rates from a monetary policy perspective. It provides an overview of the close cooperation with market participants, the creation and main features of the €STR, how it is calculated on the basis of MMSR data, the robustness of its production and overall framework and the transparency policy on errors.
- JEL Code:
- E49
- 20 June 2022
-
Economic Bulletin - BoxEconomic Bulletin Issue 4, 2022Details
- Abstract:
- The influx of Ukrainian refugees is expected to lead to a gradual increase in the size of the euro area labour force. Back-of-an-envelope median estimates suggest that the influx of Ukrainian refugees could boost the euro area labour force by between 0.2% and 0.8% in the medium term, depending on the duration and the severity of the war. This would result in the labour force gaining between 0.3 and 1.3 million additional workers. However, labour market rigidities and other labour market frictions may slow down the integration process, with the result that Ukrainian refugees are likely to enter the labour force very gradually.
- JEL Code:
- E24,J15,J21,J61
- 17 June 2022
-
Working Paper Series - Issue No. 2669Details
- Abstract:
- Using CPI micro data for 11 euro area countries covering about 60% of the euro area consumption basket over the period 2010-2019, we document new findings on consumer price rigidity in the euro area: (i) each month on average 12.3% of prices change, which compares with 19.3% in the United States; when we exclude price changes due to sales, however, the proportion of prices adjusted each month is 8.5% in the euro area versus 10% in the United States; (ii) differences in price rigidity are rather limited across euro area countries but much larger across sectors; (iii) the median price increase (resp. decrease) is 9.6% (13%) when including sales and 6.7% (8.7%) when excluding sales; cross-country heterogeneity is more pronounced for the size than for the frequency of price changes; (iv) the distribution of price changes is highly dispersed: 14% of price changes in absolute values are lower than 2% whereas 10% are above 20%; (v) the overall frequency of price changes does not change much with inflation and does not react much to aggregate shocks; (vi) changes in inflation are mostly driven by movements in the overall size; when decomposing the overall size, changes in the share of price increases among all changes matter more than movements in the size of price increases or the size of price decreases. These findings are consistent with the predictions of a menu cost model in a low inflation environment where idiosyncratic shocks are a more relevant driver of price adjustment than aggregate shocks.
- JEL Code:
- D40,E31
- Network:
- Price-setting Microdata Analysis Network (PRISMA)
- 17 June 2022
-
Euro area pension fund statisticsAnnexes
- 16 June 2022
-
Euro area pension fund statistics
- 16 June 2022
-
SpeechDetails
- Subtitle:
- Keynote speech by Fabio Panetta, Member of the Executive Board of the ECB, at the European Payments Council’s 20th anniversary conference
- 16 June 2022
-
InterviewDetails
- Subtitle:
- Interview with Isabel Schnabel, Member of the Executive Board of the ECB, conducted by Dein Spiegel on 19 May 2022
- 16 June 2022
-
InterviewDetails
- Subtitle:
- Interview with Luis de Guindos, Vice-President of the ECB, conducted by Maria Vasileiou
- 15 June 2022
-
SpeechDetails
- Subtitle:
- Introductory statement by Fabio Panetta, Member of the Executive Board of the ECB, at the Committee on Economic and Monetary Affairs of the European Parliament
- 15 June 2022
- 15 June 2022
- 15 June 2022
-
Research Bulletin - Issue No. 96Details
- Abstract:
- While historically only very large firms issued in the European corporate bond market, recent years have seen the entry of many new players: small, private, and unrated issuers. Firm-level data show these new players face different game dynamics. They are disconnected from aggregate market movements and still depend heavily on banks. This means hey could potentially affect financial stability and be less responsive to policy interventions.
- JEL Code:
- G21,G32,E44
- 14 June 2022
-
SpeechDetails
- Subtitle:
- Commencement speech by Isabel Schnabel, Member of the Executive Board of the ECB, to the graduates of the Master Program in Money, Banking, Finance and Insurance of the Panthéon-Sorbonne University
Annexes- 14 June 2022
-
Speech
- 14 June 2022
-
Weekly financial statementAnnexes
- 14 June 2022
-
Weekly financial statement - Commentary
- 14 June 2022
-
The international role of the euro - BoxThe international role of the euro 2022Details
- 14 June 2022
-
The international role of the euro - BoxThe international role of the euro 2022Details
- 14 June 2022
-
The international role of the euro - BoxThe international role of the euro 2022Details
- 14 June 2022
-
The international role of the euro - BoxThe international role of the euro 2022Details
- 14 June 2022
-
The international role of the euro - BoxThe international role of the euro 2022Details
- 14 June 2022
-
Press release
- 14 June 2022
-
The international role of the euroAnnexes
- 14 June 2022
-
The international role of the euro - Statistical annex
- 14 June 2022
-
Working Paper Series - Issue No. 2668Details
- Abstract:
- When a bank receives credit from the central bank, its Liquidity Coverage Ratio (LCR) changes. In most cases, the LCR increases. We investigate how this LCR boost from central bank credit affects banks’ behaviour, looking at the euro area during the Corona year 2020. Our theoretical and empirical analyses suggest that banks that get strong LCR boosts from central bank credit tend to take actions that reduce their LCRs. In this sense, banks consume their LCR boosts. In terms of policy conclusions, our analysis suggests that central bank credit operations can provide strong incentives for banks to take actions that reduce their LCRs. Such actions, which could include the provision of additional credit and a shortening of the maturity structure of the liabilities of the banks, plausibly have an impact on the real economy. As such, our analysis reveals what may be called a “LCR channel” of monetary policy transmission.
- JEL Code:
- E52,E58,G28
- 13 June 2022
-
Occasional Paper Series - Issue No. 295Details
- Abstract:
- Well-functioning risk-sharing arrangements are essential for the shock absorbing capacity and resilience of an economy, even more so for countries in a monetary union where the single monetary policy is unable to address asymmetric shocks. The common shocks that euro area member states have been facing over the past years are just that: common. Yet their impacts are far from equal across countries, implying that risk sharing remains an important issue. This paper discusses the different forms and channels of risk sharing and reviews the main arguments in favour and against the development of different forms of public and private risk sharing in the euro area, focusing in particular on whether they act as complements or substitutes. It proposes a stylised theoretical model of a monetary union to test the complementarity or substitutability between public and private risk sharing. While the model calibration finds that substitutability prevails, the model also contains an interesting complementarity whereby a central fiscal capacity makes private risk sharing more efficient, especially in crisis times. Our findings are relevant for the ongoing policy discussion on EMU deepening as the provision of public risk sharing as well as the overall degree of risk sharing are still comparatively low in the euro area.
- JEL Code:
- C23,E62,G11,G15
- 13 June 2022
-
Macroprudential Bulletin - Focus - Issue No. 17Details
- Abstract:
- This special focus discusses how different segments of the financial sector, i.e. banks, insurers, pension funds, investment funds and hedge funds, react to stress scenarios similar to some of those observed at the onset of the pandemic. In our framework, different financial intermediaries interact in asset, funding and derivatives markets, and face solvency and liquidity constraints. The model is calibrated to the euro area and simulates two shocks, namely a deterioration in the corporate outlook and a large-scale rating downgrade of corporate bonds. It estimates balance-sheet losses for the main euro area financial sectors and the change in prices of marketable financial assets.
- JEL Code:
- G01,G12,G18,G20,G21,G22,G23,G288
- 13 June 2022
-
Macroprudential Bulletin - Article - Issue No. 17Details
- Abstract:
- Regulatory stress tests have outgrown their initial role of assessing the robustness of individual financial institutions. Today, they are used to test the resilience of financial systems, set prudential policies, and communicate with the industry and markets.
- JEL Code:
- G11,G14,G21,G28
- 13 June 2022
-
Macroprudential Bulletin - Article - Issue No. 17Details
- Abstract:
- The publication of stress test results improves transparency and market discipline. It promotes financial stability by generating new information, thus improving the ability of markets to discriminate between banks. The results of this analysis confirm the certification role of stress tests.
- JEL Code:
- G11,G14,G21,G28
- 13 June 2022
-
Macroprudential Bulletin - Article - Issue No. 17Details
- Abstract:
- Macroprudential stress testing has provided timely policy assessment to tackle high levels of uncertainty about future developments during the COVID-19 pandemic and to back communications promoting the use of macroprudential capital buffers by banks. The lessons learned from the crisis can inform the setting of buffers along the path to policy normalisation.
- JEL Code:
- E58,G01,G21,G28
- 13 June 2022
-
Macroprudential Bulletin - Article - Issue No. 17Details
- Abstract:
- A system-wide stress testing framework allows for a comprehensive assessment of the financial impact of severe climate risk scenarios. The combined reactions of banks, investment funds and insurers to climate stress amplify losses in the financial system.
- JEL Code:
- D85,G01,G21,G23,L14
- 13 June 2022
-
Euro area securities issues statisticsAnnexes
- 12 June 2022
-
Euro area securities issues statistics
- 12 June 2022
-
Euro area securities issues statistics
- 13 June 2022
-
Survey of Monetary Analysts - Aggregate results
- 11 June 2022
-
SpeechDetails
- Subtitle:
- Keynote speech by Frank Elderson, Member of the Executive Board of the ECB and Vice-Chair of the Supervisory Board of the ECB, Florence School of Banking and Finance’s Bank Board Academy “Sitting on Bank boards: Suitability and better governance”
- 10 June 2022
-
TARGET Annual Report
- 9 June 2022
-
PodcastRelated
- 9 June 2022
-
Monetary policy statementDetails
- Subtitle:
- Christine Lagarde, President of the ECB,
Luis de Guindos, Vice-President of the ECB
- 9 June 2022
-
Macroeconomic projections for the euro areaAnnexes
- 9 June 2022
- 23 June 2022
- 9 June 2022
-
Combined monetary policy decisions and statementRelated
- 9 June 2022
-
Monetary policy statement
- 9 June 2022
-
Monetary policy decision
- 9 June 2022
-
Monetary policy statementDetails
- Subtitle:
- Christine Lagarde, President of the ECB,
Luis de Guindos, Vice-President of the ECB
Related- 9 June 2022
-
Combined monetary policy decisions and statement
- 9 June 2022
- 9 June 2022
-
Monetary policy decisionRelated
- 9 June 2022
-
Combined monetary policy decisions and statement
- 7 July 2022
-
Monetary policy account
- 7 June 2022
-
Weekly financial statementAnnexes
- 7 June 2022
-
Weekly financial statement - Commentary
- 2 June 2022
-
Press release
- 2 June 2022
-
MFI interest rate statistics
- 1 June 2022
-
SpeechDetails
- Subtitle:
- Presentation by Philip R. Lane, Member of the Executive Board of the ECB, at the CEPR Paris Symposium
- 1 June 2022
-
SpeechDetails
- Subtitle:
- Introductory statement by Fabio Panetta, Member of the Executive Board of the ECB, at the meeting of the Euro Accession Countries Working Group of the Committee on Economic and Monetary Affairs of the European Parliament
Related- 1 June 2022
- 1 June 2022
-
Convergence Report
- 1 June 2022
-
Press releaseRelated
- 1 June 2022
- 1 June 2022
-
Convergence Report
- 1 June 2022
-
Convergence ReportRelated
- 1 June 2022
- 1 June 2022
- 1 June 2022
-
SpeechDetails
- Subtitle:
- Introductory remarks by Fabio Panetta, Member of the Executive Board of the ECB, at the seventh meeting of the Euro Cyber Resilience Board for pan-European Financial Infrastructures
- 1 June 2022
-
Working Paper Series - Issue No. 2667Details
- Abstract:
- This paper studies the dynamics of contagion across the banking, insurance and shadow banking sectors of 16 advanced economies in the period 2006-2018. We construct Granger causality-in-risk networks and introduce higher-order aggregate networks and temporal node centralities in an economic setting to capture non-Markovian network features. Our approach uncovers the dynamics of financial contagion as it is transmitted across segments of the financial system and jurisdictions. Temporal centralities identify countries in distress as the nodes through which contagion propagates. Moreover, the banking system emerge as the primary source and transmitter of stress while banks and shadow banks are highly interconnected. The insurance sector is found to contribute less to stress transmission in all periods, except during the global financial crisis. Our approach, as opposed to one that uses memoryless measures of network centrality, is able to identify more clearly the nodes that are critical for the transmission of financial contagion.
- JEL Code:
- C02,C22,G01,G2
- 1 June 2022
-
Press releaseRelated
- 1 June 2022
-
Survey on the Access to Finance of Enterprises in the euro area
- 1 June 2022
-
Euro area insurance corporations statisticsAnnexes
- 1 June 2022
-
Euro area insurance corporations statistics
- 1 June 2022
-
Survey on the Access to Finance of Enterprises in the euro areaAnnexes
- 1 June 2022
-
SAFE questionnaire
Related - 31 May 2022
-
Weekly financial statementAnnexes
- 31 May 2022
-
Weekly financial statement - Commentary
- 31 May 2022
-
Working Paper Series - Issue No. 2666Details
- Abstract:
- This paper proposes a central fiscal capacity for the euro area that generates transfers in response to eurozone, country, and region-specific shocks. The main novelty of this fiscal capacity is that it allows a joint response to these three types of shocks within a single scheme. Based on NUTS3 regional data over the last two decades and regional fiscal multiplier estimates, our analysis shows that - with a limited risk of moral hazard - substantial stabilisation could have been achieved in response to the eurozone and regional shocks, while country-specific shocks were on average less severe and therefore needed less stabilisation.
- JEL Code:
- C38,E32,E62,E63
- 30 May 2022
-
InterviewDetails
- Subtitle:
- Interview with Philip R. Lane, Member of the Executive Board of the ECB, conducted by Nuño Rodrigo and Laura Salces on 25 May 2022
- 27 May 2022
-
Monetary developments in the euro areaAnnexes
- 27 May 2022
-
Monetary developments in the euro area
- 27 May 2022
-
Research Bulletin - Issue No. 95Details
- Abstract:
- To what extent are corporate taxes passed on to consumers? And more generally, how do wholesaleproducers affect retail prices? Using data from Germany, where individual municipalities set local corporate taxrates, we shed new light on these questions. To estimate the impact of changes in producers’ tax rates onconsumer prices, we link 1,058 tax changes between 2013 and 2017 to changes in the retail prices of morethan 125,000 food and personal care products sold across Germany. A one percentage point increase in thelocal corporate tax leads on average to a 0.4% increase in the retail price of goods “exported” by the taxedfirms to stores in the rest of Germany. While neither the size of producers nor their market shares seem toaffect the strength of this pass-through, the type of store selling the product does: supermarkets andhypermarkets account for most of the increase in prices. Our findings suggest the following policy-relevantimplications: i) producers use their market power to shield profits from corporate taxes; ii) some retailers passon a large share of wholesale price changes; iii) the low-inflation period from 2013 to 2017 did not impair thepass-through of shocks to consumer prices.
- JEL Code:
- F12,F45,E13,H71,L11
- Network:
- Price-setting Microdata Analysis Network (PRISMA)
- 25 May 2022
-
SpeechDetails
- Subtitle:
- Presentation by Philip R. Lane, Member of the Executive Board of the ECB, at the 20th anniversary of the Germán Bernácer Prize
- 25 May 2022
-
Press releaseRelated
- 25 May 2022
-
Financial Stability Review
- 25 May 2022
-
Financial Stability ReviewAnnexes
- 25 May 2022
Related- 25 May 2022
- 25 May 2022
-
SpeechDetails
- Subtitle:
- Speech by Fabio Panetta, Member of the Executive Board of the ECB, at a policy lecture hosted by the SAFE Policy Center at Goethe University and the Centre for Economic Policy Research (CEPR)
- 24 May 2022
-
Weekly financial statementAnnexes
- 24 May 2022
-
Weekly financial statement - Commentary
- 24 May 2022
-
Press releaseRelated
- 24 May 2022
-
Survey on credit terms and conditions in euro-denominated securities financing and OTC derivatives marketsAnnexes
- 24 May 2022
-
Other publication
- 24 May 2022
- 24 May 2022
-
Financial Stability Review - ArticleFinancial Stability Review Issue 1, 2022Details
- Abstract:
- The stellar growth, volatility and financial innovation currently seen in the crypto-asset ecosystem, as well as the rising involvement of institutional investors, show how important it is to gain a better understanding of the potential risks crypto-assets could pose to financial stability if trends continue on this trajectory. This special feature provides an update on crypto-asset market developments and a general overview of risks stemming from unbacked crypto-assets and decentralised finance, given the way in which they have evolved and their specific characteristics and risks. Systemic risk increases in line with the level of interconnectedness between crypto-assets and the traditional financial sector, the use of leverage and lending activity. It is important to close regulatory and data gaps in the crypto-assets ecosystem to mitigate such systemic risks.
- JEL Code:
- G18,G19,G23,G28,G51
- 23 May 2022
-
Financial Stability Review - ArticleFinancial Stability Review Issue 1, 2022Details
- Abstract:
- The ECB is continuing its work on incorporating climate-related risks into assessments of financial stability. This includes a new analysis of disclosure, pricing and greenwashing risks in financial markets, as well as continued monitoring of financial institutions’ exposure to transition and physical risks. There is some encouraging evidence of better disclosure by non-financial corporations and increasing awareness of climate-related risks in financial markets. Progress made by banks, however, has been more limited. Established and newer metrics show no clear evidence of a reduction in climate-related risks, revealing instead a potential for amplification mechanisms stemming from exposure concentration, cross-hazard correlation and financial institutions’ overlapping portfolios. These findings can inform evidence-based international and European policy debates around climate-related corporate disclosure, standards for sustainable financial instruments and climate-related prudential policies. More generally, amid high uncertainty around governments’ transition policies in an environment of volatile energy prices, further investments in the transition to a net-zero economy would also have a positive impact on medium-term growth and energy security.
- JEL Code:
- G10,G18,G20,G32,Q51,Q54
- 23 May 2022
-
The ECB BlogDetails
- Subtitle:
- As the expected date of interest rate lift-off draws closer, it gets more important to clarify the path of policy normalisation ahead of us – especially given the complex environment that monetary policy in the euro area is facing, says President Christine Lagarde in The ECB Blog.
- 23 May 2022
-
Survey of Monetary Analysts
- 23 May 2022
-
Euro area financial vehicle corporation statisticsAnnexes
- 23 May 2022
-
Euro area financial vehicle corporation statistics
- 23 May 2022
-
Euro area investment fund statisticsAnnexes
- 23 May 2022
-
Euro area investment fund statistics
- 20 May 2022
-
Governing Council decisions - Other decisions
- 20 May 2022
-
SpeechDetails
- Subtitle:
- Presentation by Philip R. Lane, Member of the Executive Board of the ECB, at the Nobel Symposium in Economics on "Covid-19 and the Economy: Policies and Impacts"
- 20 May 2022
-
Working Paper Series - Issue No. 2665Details
- Abstract:
- We analyse the double materiality of climate physical and transition risks in the euro area economy and banking sector. By tailoring the EIRIN Stock-Flow Consistent behavioural model, we provide a dynamic balance sheet assessment of the Network for Greening the Financial System scenarios. We find that an orderly transition achieves early co-benefits by reducing carbon emissions (12% less in 2040 than in 2020) while supporting growth in economic output. In contrast, a disorderly transition worsens the economic performance and financial stability of the euro area. Further, in disorderly transition with high physical risks, real GDP decreases by 12,5%in 2050 relative to an orderly transition. Second, by extending the concept of climate sentiments to firms, we analyse how expectations about climate policy credibility affect investment decision in high or low-carbon goods. Firms that trust an orderly policy introduction and anticipate carbon price scenarios switch earlier to low-carbon investments. This, in turn, accelerates economic decarbonization and decreases the risk of carbon stranded assets for investors. Our results highlight the crucial role of early and credible climate policies to signal investment decisions in the low-carbon transition.
- JEL Code:
- B59,Q50
- 19 May 2022
-
SpeechDetails
- Subtitle:
- Speech by Luis de Guindos, Vice-President of the ECB, at the 20th annual symposium on “Building the financial system of the 21st century: an agenda for Europe and the United States” organised by the Program on International Financial Systems and Harvard Law School (by videoconference)
- 19 May 2022
-
Monetary policy account
- 19 May 2022
-
Working Paper Series - Issue No. 2664Details
- Abstract:
- This paper documents a durable increase in the cross-sectoral dispersion of earnings expectations during the COVID-19 crisis. The rise in dispersion of earnings forecasts can be explained by the introduction of lockdown measures, which had a particularly adverse impact on the travel sector. Accordingly, in terms of earnings expectations, countries that are relatively independent of the travel sector were least affected by a tightening of lockdowns. At the same time, vaccinations have been a game changer: more stringent lockdown measures added far less to the cross-sectoral dispersion in earnings expectations once vaccines started to be rolled out in late 2020. Going forward, the dispersion in earnings expectations continues to stand at elevated levels.
- JEL Code:
- E44,G10,G12
- 19 May 2022
-
Working Paper Series - Issue No. 2663Details
- Abstract:
- Using newly available micro-data, this paper documents new evidence on the rise of nonbank credit to mid-size firms in the euro area. Recent new issuers of debt securities are typically small, private, and unrated. Their spreads are comparable to high-yield bonds. Traditional “buy-and-hold” investors are small for unrated and smaller issuers, while nonbank intermediaries are large. These non-bank intermediaries were however as stabilizing as insurers during the March 2020 turmoil. Nevertheless, the subsequent bond issuance wave was restricted to large and rated firms. This market thus more closely resembles “private debt” markets than the traditional bond market.
- JEL Code:
- G21,G32,E44
- Network:
- Research Task Force (RTF)
- 19 May 2022
-
Occasional Paper Series - Issue No. 294Details
- Abstract:
- The paper provides an overview of studies on the social and private costs of retail payments conducted since 2013 in nine EU countries and collates the results obtained. Social costs of retail payments are the overall costs resulting from providing payment services to society and deriving from the resource costs incurred by all parties along the payment chain. Private costs, in contrast, are the costs incurred by the individual stakeholder only, such as banks and other payment intermediaries. Understanding the social and private costs of retail payments is crucial for assessing the impact of the rapidly changing retail payment landscape, such as the shift to electronic payments, and for designing strategies for moving towards cost efficient retail payments. Despite varying scopes and methodological differences, the analysis reached the following findings: a comparison of results between 2009 and 2016 in Denmark and Italy, between 2015 and 2018 in Poland and between 2009 and 2017 in Portugal, points to decreasing overall social costs for retail payments relative to gross domestic product (GDP). Moreover, the data suggest that changing payment habits – the shift to electronic payments and in particular debit cards – have an impact on unit costs, which represent the costs per transaction. The unit costs of debit card payments have decreased over time and the gap between the unit costs of cash and those for debit cards has narrowed. This suggests that the increasing number of debit card payments, to which high fixed costs are attached, has led to lower unit costs relative to those of cash. The only study on the costs of retail payments in Europe, published as an ECB occasional paper, dates from 2012 and is based on data from 2009. Although more recent surveys at national level are available, no single source exists that sheds light on recent information on the costs of retail payments in Europe. Since the national surveys follow different approaches, in terms of both scope and methodology used, for obtaining the costs of retail payments, the resu
- JEL Code:
- D23,D24,O52,E42
- 19 May 2022
-
Balance of payments (monthly)
- 17 May 2022
-
Weekly financial statementAnnexes
- 17 May 2022
-
Weekly financial statement - Commentary
- 16 May 2022
-
Euro area balance of payments and international investment position statistics - Quality reportAnnexes
- 16 May 2022
- 16 May 2022
-
SpeechDetails
- Subtitle:
- Keynote speech by Fabio Panetta, Member of the Executive Board of the ECB, at the National College of Ireland
- 13 May 2022
-
Working Paper Series - Issue No. 2662Details
- Abstract:
- We propose a model of financial intermediation, payments choice, and privacy in the digital economy. While digital payments enable mer-chants to sell goods online, they reveal information to their lender. Cash guarantees anonymity, but limits distribution to less efficient of-fline venues. In equilibrium, merchants trade off the efficiency gains from online distribution (with digital payments) and the informational rents from staying anonymous (with cash). Privacy-preserving digi-tal payments raise welfare by reducing privacy concerns, but only ar-rangements that enable data-sharing through consent functionalities guarantee that the social optimum is attained.
- JEL Code:
- D82,E42,E58,G21
- 13 May 2022
-
Working Paper Series - Issue No. 2661Details
- Abstract:
- In this study, we reassess the links between commercial bank ownership and lending growth during the 1996–2019 period. We find evidence that the lending activities of foreign state-controlled and foreign privately owned banks differ, particularly during different crisis type periods and origins. Foreign state-controlled banks’ loan growth rates are higher than those of foreign private-owned banks during host banking crises. By contrast, foreign state-controlled banks reduce their credit growth during a home banking crisis, while foreign private-owned banks increase lending in the host countries. Moreover, we find evidence that bank-specific characteristics were more important determinants of credit growth than ownership structure during the global financial crisis of 2008 and gain in importance in the post-crisis period.
- JEL Code:
- G01,G21,G28
- 12 May 2022
-
Occasional Paper Series - Issue No. 293Details
- Abstract:
- In July 2021 the Eurosystem decided to launch the investigation phase of the digital euro project, which aims to provide euro area citizens with access to central bank money in an increasingly digitalised world. While a digital euro could offer a wide range of benefits, it could prompt changes in the demand for bank deposits and services from private financial entities (ECB, 2020a), with knock-on consequences for bank lending and resilience. By inducing bank disintermediation, a central bank digital currency, or CBDC, could in principle alter the transmission of monetary policy and impact financial stability. To prevent this risk, options to moderate CBDC take-up are being discussed widely.In view of the significant degree of uncertainty surrounding the design of a potential digital euro, its demand and the prevailing environment in which it would be introduced, this paper explores a set of analytical exercises that can offer insights into the consequences it could have for bank intermediation in the euro area.Based on assumptions about the degree of substitution between different forms of money in normal times, several take-up scenarios are calculated to illustrate how the potential demand for a digital euro might shape up. The paper then analyses the mechanisms through which commercial banks and the central bank could react to the introduction of a digital euro. Overall, effects on bank intermediation are found to vary across credit institutions in normal times and to be potentially larger in stressed times. Further, a potential digital euro’s capacity to alter system-wide bank run dynamics appears to depend on a few crucial factors, such as CBDC remuneration and usage limits.
- JEL Code:
- E42,E51,G21
- 12 May 2022
-
Occasional Paper Series - Issue No. 292Details
- Abstract:
- After addressing the securitisation of non-performing loans (NPLs) within the broader context of the ECB’s efforts to reduce NPL stocks and inflows, we investigate the structural and pricing features of NPL securitisations, issued by large banks in the euro area, by drawing on a unique and comprehensive dataset. In doing so, we provide an overview and typology of NPL securitisations issued in the past five years by large banks in the euro area and propose a concrete framework to compare and assess NPL securitisations across multiple dimensions. Despite methodological constraints resulting from the inherently bespoke nature of securitisations, we are able to identify structural differences between transactions that rely solely on private market participants and transactions that benefit from government guarantee schemes. Indeed, the existing data indicates that transactions involving government guarantee schemes display distinct structural features and higher costs for originating banks when compared with purely private market transactions in our dataset. Our analysis indicates that government guarantee schemes might not solely act as an incentive to new investors who would otherwise not invest in NPLs, but possibly also create conditions, for a new market, distinct in particular from the private NPL securitisations market (in terms of asset quality, capital efficiency, etc.). We believe that further research on the impact of government guarantee schemes on market participants’ behaviour and on the pricing and structuring of NPL transactions, as well as their impact over time would greatly help policymakers and supervisors to strengthen the design of future policy options for dealing with NPL stocks.
- JEL Code:
- G21,G28,G29
- 12 May 2022
-
Euro area securities issues statisticsAnnexes
- 12 May 2022
-
Euro area securities issues statistics
- 12 May 2022
-
Euro area securities issues statistics
- 11 May 2022
-
SpeechDetails
- Subtitle:
- Speech by Isabel Schnabel, Member of the Executive Board of the ECB, at a conference organised by the Österreichische Vereinigung für Finanzanalyse und Asset Management
Annexes- 11 May 2022
- 11 May 2022
-
SpeechDetails
- Subtitle:
- Speech by Christine Lagarde, President of the ECB, at the international conference to mark the 30th anniversary of Banka Slovenije
- 10 May 2022
-
Weekly financial statementAnnexes
- 10 May 2022
-
Weekly financial statement - Commentary
- 10 May 2022
-
Euro money market statistics
- 7 May 2022
-
Interview
- 6 May 2022
-
InterviewDetails
- Subtitle:
- Interview on Twitter with Frank Elderson, Member of the Executive Board of the ECB, conducted and published on 6 May 2022
- 6 May 2022
- 6 May 2022
- 6 May 2022
-
T2S Annual Report
- 5 May 2022
-
SpeechDetails
- Subtitle:
- Speech by Philip R. Lane, Member of the Executive Board of the ECB, at Bruegel
- 5 May 2022
-
Press releaseAnnexes
- 4 May 2022
- 4 May 2022
- 4 May 2022
- 5 May 2022
-
MFI interest rate statistics
- 5 May 2022
-
InterviewDetails
- Subtitle:
- Interview with Fabio Panetta, Member of the Executive Board of the ECB, conducted by Marco Zatterin
- 4 May 2022
- 4 May 2022
-
Working Paper Series - Issue No. 2660Details
- Abstract:
- Political science research has established that trust in institutions, including central banks, is shaped by socio-economic and demographic factors, as well as by the assessment of institutional features and by slow-moving components such as culture. However, the role of cognitive processes has largely been neglected, especially in the analysis of central bank trust. In this paper we aim to address this gap focusing on the case of the European Central Bank (ECB). We introduce the concepts of “instinctive trust”, which captures an on-the-spot judgement on the institution’s trustworthiness, and of “reflective trust”, which refers to a more pondered opinion on the matter. Using a survey experiment, we find that deeper consideration about the ECB promotes less trust in the institution compared to an on-the-spot judgement. This result is mainly driven by women, and in particular by those who say they possess a low understanding of the central bank’s policies.
- JEL Code:
- C83,D83,E58,Z13
- 4 May 2022
-
Digital Euro Investigation Phase documentAnnexes
- 4 May 2022
-
Digital Euro Investigation Phase document
- 4 May 2022
-
Digital Euro Investigation Phase document
- 4 May 2022
-
Digital Euro Investigation Phase document
- 4 May 2022
-
Digital Euro Investigation Phase document
- 4 May 2022
-
Digital Euro Investigation Phase documentAnnexes
- 4 May 2022
-
Digital Euro Investigation Phase document
- 4 May 2022
-
Digital Euro Investigation Phase document
- 4 May 2022
-
Digital Euro Investigation Phase document
- 4 May 2022
-
Digital Euro Investigation Phase document
- 3 May 2022
-
InterviewDetails
- Subtitle:
- Interview with Isabel Schnabel, Member of the Executive Board of the ECB, conducted by Jan Mallien and Frank Wiebe on 29 April 2022
- 3 May 2022
-
Weekly financial statementAnnexes
- 3 May 2022
-
Weekly financial statement - Commentary
- 3 May 2022
-
Working Paper Series - Issue No. 2659Details
- Abstract:
- Swift changes in investors' sentiment, such as the one triggered by COVID-19 global outbreak in March 2020, lead to financial tensions and asset price volatility. We study the interactions of behavioral and financial frictions in an environment with endogenous risk-taking and capital accumulation. Agents form diagnostic expectations about future stochastic outcomes: recent realizations of aggregate shocks are expected to persist. This behavioral friction gives rise to sentiment cycles with excessive investment and occasional safety traps. The interactions with financial frictions lead to an endogenous amplification of financial instability. We discuss implications for policy interventions.
- JEL Code:
- E32,E44,E71
- 3 May 2022
-
Working Paper Series - Issue No. 2658Details
- Abstract:
- We offer a theory of financial contagion based on the information choice of investors after observing a financial crisis elsewhere. We study global coordination games of regime change in two regions linked by an initially unobserved macro shock. A crisis in region 1 is a wake-up call to investors in region 2. It induces them to reassess the regional fundamental and acquire information about the macro shock. Contagion can occur even after investors learn that region 2 has no ex-post exposure to region 1. We explore normative and testable implications of the model. In particular, our results rationalize evidence about contagious currency crises and bank runs after wake-up calls and provide some guidance for future empirical work.
- JEL Code:
- D83,F3,G01,G21
- 2 May 2022
-
€STR Transparency on errors
- 1 May 2022
-
InterviewDetails
- Subtitle:
- Interview with Luis de Guindos, Vice-President of the ECB, conducted by Adolfo Lorente and Manu Álvarez on 26 April
- 29 April 2022
-
Legal conference proceedings
- 29 April 2022
-
Monetary developments in the euro areaAnnexes
- 29 April 2022
-
Monetary developments in the euro area
- 28 April 2022
-
Digital Euro Investigation Phase documentAnnexes
- 28 April 2022
-
Digital Euro Investigation Phase document
- 17 May 2022
-
Digital Euro Investigation Phase document
- 1 July 2022
-
Digital Euro Investigation Phase document
- 28 April 2022
-
Euro area economic and financial developments by institutional sector (full)
- 28 April 2022
-
Economic Bulletin
- 28 April 2022
-
Economic Bulletin - BoxEconomic Bulletin Issue 3, 2022Details
- Abstract:
- The gradual phasing-out of the pandemic collateral easing measures in three steps between July 2022 and March 2024 will restore the Eurosystem’s pre-pandemic risk tolerance in its collateral framework, while avoiding cliff effects in collateral availability. The collateral easing measures introduced in April 2020 facilitated banks’ access to Eurosystem credit operations by adding around €285 billion of collateral, playing an important role in supporting the provision of credit to the economy during the coronavirus (COVID-19) pandemic. The ECB will continue to waive the minimum credit quality requirement for Greek government bonds (GGBs), allowing national central banks (NCBs) to accept them as collateral at least as long as reinvestments in such bonds under the pandemic emergency purchase programme (PEPP) continue.
- JEL Code:
- E58,E65,G01
- 28 April 2022
-
Economic Bulletin - BoxEconomic Bulletin Issue 3, 2022Details
- Abstract:
- This box reviews the large errors made throughout 2021 and the first quarter of 2022 in Eurosystem and ECB staff inflation projections. Errors in conditioning assumptions, notably due to unexpected energy price increases, are estimated to explain around three-quarters of these errors. Such errors are inherent to the nature of Eurosystem and ECB staff projections, which are conditioned on a set of assumptions, mainly stemming from market-based information including on energy prices. Supply bottlenecks being more persistent than expected, the recovery in economic activity being swifter than predicted, and the transmission of the energy price shock possibly being stronger than usual also played a role, and these factors likely explain a large portion of the errors in projecting HICP inflation excluding energy and food. A comparison with peer institutions shows that large inflation errors were widespread, not only across forecasters but also across economies. This emphasises the predominant role of global factors in a context of steep commodity price increases, especially for energy. While Eurosystem and ECB staff take all available information into account and continuously refine the models used in their projections, inflation developments are likely to remain challenging to forecast in the near term due to the volatile price movements in energy commodities, the uncertainty caused by the war in Ukraine and reopening effects following the removal of pandemic-related restrictions. In this context, complementing the Eurosystem and ECB staff baseline projections with scenario and sensitivity analyses help provide a richer representation of the inflation outlook.
- JEL Code:
- C53,E37,E58
- 28 April 2022
-
Economic Bulletin - BoxEconomic Bulletin Issue 3, 2022Details
- Abstract:
- Minimum wages are prevalent in many euro area countries. Since 2008 minimum wages in the euro area have tended, on average, to grow at a similar pace to wages and salaries per employee. However, minimum wage growth can also significantly deviate from growth in wages and salaries in some years. Minimum wages are expected to grow at a substantially stronger pace than wages and salaries in many euro area countries in 2022 and 2023 – leading to a stronger than usual upward impact of minimum wages on euro area wage growth while the absolute direct mechanical impact on wage growth in the euro area is likely to remain contained.
- JEL Code:
- E24,J3,E31
- 28 April 2022
-
Economic Bulletin - BoxEconomic Bulletin Issue 3, 2022Details
- Abstract:
- This box reviews the dynamics of household savings as derived from deposit flows across the wealth distribution from the onset of the COVID-19 pandemic in the first quarter of 2020 to the surge in inflation that started in the second quarter of 2021. An empirical model disentangles the underlying drivers of household deposit flows across the wealth distribution. Pandemic-related restrictions initially led to an increase in deposit flows, while increases in inflation arising mostly from cost-push shocks subsequently weighed on deposit flows, raising savings inequality in both cases. It is likely that developments in deposit dynamics and savings inequality will continue to be shaped by pandemic-related restrictions and cost-push inflation, as well as uncertainty caused by the war in Ukraine.
- JEL Code:
- D12,D14,R20,Q11
- 28 April 2022
-
Other publicationRelated
- 28 April 2022
-
Annual Report
- 28 April 2022
-
SpeechDetails
- Subtitle:
- Introductory remarks by Luis de Guindos, Vice-President of the ECB, at the ECON Committee of the European Parliament
Related- 28 April 2022
-
Annual Report
- 28 April 2022
-
Feedback on the input provided by the European Parliament as part of its resolution on the ECB’s Annual ReportRelated
- 28 April 2022
-
Annual Report
- 28 April 2022
-
Annual ReportRelated
- 28 April 2022
- 28 April 2022
- 28 April 2022
-
Other publication
- 17 February 2022
-
Annual Accounts
- 27 April 2022
-
SpeechDetails
- Subtitle:
- Speech by Christine Lagarde, President of the ECB, at Manager Magazin’s Top100 women in German Business
- 27 April 2022
-
Occasional Paper Series - Issue No. 291Details
- Abstract:
- This paper assesses the potential economic impact of Next Generation EU (NGEU), focusing on the euro area. Its findings suggest that the envisaged national investment and reform plans present a coherent package to support both recovery from the pandemic-induced crisis and longer-term modernisation of the euro area economy through their digital and green transitions. NGEU, however, can only unfold its full potential if all plans are implemented in a timely and effective way. We estimate the impact of the national plans on output, inflation and public debt using ECB staff economic models under the assumption of successful implementation. Specifically, NGEU is expected to take effect through three channels: structural reform, fiscal stimulus and risk premium. Overall, NGEU may increase gross domestic product (GDP) in the euro area by up to 1.5% by 2026, with the impact expected to be significantly larger in the main beneficiary countries. In Italy and Spain, two of the main beneficiaries, the public debt-to-GDP ratio may be more than 10 percentage points lower by 2031. At the same time, all euro area countries are expected to benefit from NGEU through positive spillovers, greater economic resilience and convergence across countries. Finally, the effect of NGEU on euro area inflation over the medium term is deemed to be contained to the extent that the inflationary effect of additional public expenditure is offset, at least to some degree, by the disinflationary effect of greater productive capacity resulting from the planned structural reform and investment measures.
- JEL Code:
- C54,E02,E22,E62,F45,H87,O52
- 27 April 2022
- 27 April 2022
-
Economic Bulletin - ArticleEconomic Bulletin Issue 3, 2022Details
- Abstract:
- This article explores the relationship between economic inequalities and public trust in the ECB and other European institutions. Drawing on data from the ECB’s new Consumer Expectations Survey and the Standard Eurobarometer, it analyses the relationship between different forms of economic inequality, perceptions of inequality and public trust in the ECB and other EU institutions in the euro area over the period 1999-2020 and in the context of the coronavirus (COVID-19) crisis.
- JEL Code:
- D31,E58,H11,F15,G53
- 27 April 2022
-
SpeechDetails
- Subtitle:
- Keynote speech by Philip R. Lane, Member of the Executive Board of the ECB, International Association for Official Statistics (IAOS) Conference, Kraków
- 26 April 2022
-
Weekly financial statementAnnexes
- 26 April 2022
-
Weekly financial statement - Commentary
- 26 April 2022
-
Economic Bulletin - BoxEconomic Bulletin Issue 3, 2022Details
- Abstract:
- The price of emissions allowances traded on the EU Emissions Trading System (ETS) has risen from below €10 per metric tonne of carbon to above €90 since the beginning of 2018. This box outlines the main reasons behind this increase and examines whether speculative activity may have played a significant role. It concludes that, at present, tangible evidence for a marked increase in speculative activity related to potential changes in market structure appears scarce. Furthermore, a speculation index suggests that, while speculation appears to have increased slightly since early 2019, it remains relatively moderate and well below readings during earlier phases of the ETS.
- JEL Code:
- G12,G14,G38
- 25 April 2022
-
SpeechDetails
- Subtitle:
- Speech by Fabio Panetta, Member of the Executive Board of the ECB, at Columbia University
- 25 April 2022
-
Economic Bulletin - BoxEconomic Bulletin Issue 3, 2022Details
- Abstract:
- The recent sharp increase in energy prices has significantly pushed up euro area import prices, resulting in a deterioration in the euro area terms of trade. As the demand for energy is rigid in the short term, this implies a transfer of purchasing power from the euro area to the rest of the world. We estimate a net income loss of 1.3 percentage points of GDP in the last quarter of 2021 as compared with the previous year. This consists in a drop of 3.5 percentage points of GDP due to the rise in energy prices, which is only partly offset by higher euro area export prices. The resulting widening of the deficit in the energy trade balance has reduced the euro area current account balance, and this effect is only partially compensated for by other components.
- JEL Code:
- B17,F4
- 25 April 2022
-
Economic Bulletin - ArticleEconomic Bulletin Issue 3, 2022Details
- Abstract:
- The recent increase in energy prices raises the question of the extent to which households will reduce their consumption in response. This article reviews the drivers of the macroeconomic transmission of higher energy prices. It finds that in the first half of 2021 households regarded most of the rise in energy prices as being driven by stronger aggregate demand, leading to a recovery in consumption. However, since the summer of 2021 price rises caused, among other things, by disruptions in the supply of energy have increasingly weighed on household spending. This article also analyses the distributional impact of higher energy prices. Because poorer households spend a relatively large percentage of their income on energy, their purchasing power is particularly affected when energy prices surge. While monetary policy may have a limited role to play in counteracting the fallout from supply-driven changes in energy prices, targeted fiscal policies seem well suited to addressing the impact on the most affected households.
- JEL Code:
- C23,C32,D39,E21
- 22 April 2022
-
SpeechDetails
- Subtitle:
- Keynote speech by Christine Lagarde, President of the ECB, at the Peterson Institute for International Economics
- 22 April 2022
-
Balance of payments (monthly)
- 22 April 2022
-
Digital Euro Investigation Phase document
- 21 April 2022
-
SpeechDetails
- Subtitle:
- Statement by Christine Lagarde, President of the ECB, at the forty-fifth meeting of the International Monetary and Financial Committee
- 21 April 2022
-
InterviewDetails
- Subtitle:
- Interview with Luis de Guindos, Vice-President of the ECB, conducted by Jana Randow and Alessandra Migliaccio on 20 April 2022
- 21 April 2022
-
Research Bulletin - Issue No. 94Details
- Abstract:
- The coronavirus (COVID-19) pandemic shock posed an enormous challenge to fiscal policy in supporting household consumption. In this analysis, we report the results of a recent study (Georgarakos and Kenny, 2022) on the extent to which the pandemic-related fiscal interventions influenced consumers’ spending behaviour. The study finds that improving public perceptions about the adequacy of fiscal interventions incentivises spending. Importantly, this perceptions channel operates equally strongly for consumers who receive government support and for those who do not. Consumers who view the adequacy of fiscal packages more favourably also expect higher future incomes and easier access to credit, while they do not anticipate an increase in taxes.
- JEL Code:
- D12,E12,H31
- 20 April 2022
- 20 April 2022
- 20 April 2022
- 20 April 2022
-
Weekly financial statementAnnexes
- 20 April 2022
-
Weekly financial statement - Commentary
- 19 April 2022
-
Governing Council decisions - Other decisions
- 19 April 2022
-
Survey of Monetary Analysts - Aggregate results
- 15 April 2022
-
Press releaseRelated
- 15 April 2022
-
Survey of Professional Forecasters
- 15 April 2022
-
Survey of Professional ForecastersAnnexes
- 15 April 2022
Related- 15 April 2022
- 14 April 2022
-
PodcastRelated
- 14 April 2022
-
Monetary policy statementDetails
- Subtitle:
- Christine Lagarde, President of the ECB,
Luis de Guindos, Vice-President of the ECB
- 14 April 2022
-
Economic Bulletin - BoxEconomic Bulletin Issue 3, 2022Details
- Abstract:
- This box summarises the main findings from contacts between ECB staff and representatives of 67 leading non-financial companies operating in the euro area. The exchanges mainly took place between 20 and 30 March 2022. According to these contacts, overall activity developed positively in the first months of the year, despite ongoing supply constraints as well as cost and price pressures. The war in Ukraine added further disruption to businesses, mainly in the form of further price increases for energy and raw materials, much of which would be passed through to selling prices, as well as shortages resulting in reduced production in some sectors. Overall, contacts expected growth to slow in the coming months, as higher inflation would reduce disposable income and final consumer demand, while uncertainty and downside risks were substantial.
- JEL Code:
- E2,E3,L2
- 14 April 2022
-
Combined monetary policy decisions and statementRelated
- 14 April 2022
-
Monetary policy decision
- 14 April 2022
-
Monetary policy statement
- 14 April 2022
-
Monetary policy statementDetails
- Subtitle:
- Christine Lagarde, President of the ECB,
Luis de Guindos, Vice-President of the ECB
Related- 14 April 2022
-
Combined monetary policy decisions and statement
- 14 April 2022
- 14 April 2022
-
Monetary policy decisionRelated
- 14 April 2022
-
Combined monetary policy decisions and statement
- 12 April 2022
-
Weekly financial statementAnnexes
- 12 April 2022
-
Weekly financial statement - Commentary
- 12 April 2022
-
Euro area bank lending survey - Issue No. 2022Annexes
- 12 April 2022
-
Euro area bank lending survey - Annex
Related- 12 April 2022
-
Press release
- 12 April 2022
-
Euro area securities issues statistics
- 12 April 2022
-
Press releaseRelated
- 12 April 2022
-
Euro area bank lending survey - Issue No. 2022
- 8 April 2022
-
SpeechDetails
- Subtitle:
- Opening speech by Fabio Panetta, Member of the Executive Board of the ECB, at the IESE Business School Banking Initiative Conference on Technology and Finance
- 7 April 2022
-
Monetary policy account
- 6 April 2022
-
Weekly financial statementAnnexes
- 6 April 2022
-
Weekly financial statement - Commentary
- 6 April 2022
-
SpeechDetails
- Subtitle:
- Lectio Magistralis by Fabio Panetta, Member of the Executive Board of the ECB, on the occasion of the conferral of an honorary degree in Law by the University of Cassino and Southern Lazio
- 6 April 2022
-
Press releaseRelated
- 6 April 2022
-
Financial integration and structure in the euro area
- 6 April 2022
-
Financial integration and structure in the euro areaAnnexes
- 5 April 2022
-
Financial integration and structure in the euro area
Related- 6 April 2022
- 6 April 2022
-
Speech
- 5 April 2022
-
InterviewDetails
- Subtitle:
- Interview with Philip R. Lane, Member of the Executive Board of the ECB, conducted by Nikos Rogakos
- 5 April 2022
-
Euro area economic and financial developments by institutional sector (early)
- 5 April 2022
-
Balance of payments (quarterly)
- 5 April 2022
-
Euro money market statistics
- 4 April 2022
-
Digital Euro Investigation Phase document
- 2 April 2022
-
SpeechDetails
- Subtitle:
- Speech by Isabel Schnabel, Member of the Executive Board of the ECB, at a workshop organised by the European House – Ambrosetti on “The Agenda for Europe: Macroeconomic and Structural Policy Challenges”
Annexes- 2 April 2022
-
Speech
- 1 April 2022
-
InterviewDetails
- Subtitle:
- Interview with Philip R. Lane, Member of the Executive Board of the ECB, conducted by Annette Weisbach
- 31 March 2022
-
Other publicationAnnexes
- 31 March 2022
-
- Issue No. 2022
- 31 March 2022
-
- Issue No. 2022
- 31 March 2022
-
MFI interest rate statistics
- 31 March 2022
-
SpeechDetails
- Subtitle:
- Speech by Philip R. Lane, Member of the Executive Board of the ECB, at the International Macroeconomics Chair Banque de France – Paris School of Economics
- 30 March 2022
-
SpeechDetails
- Subtitle:
- Introductory statement by Fabio Panetta, Member of the Executive Board of the ECB, at the Committee on Economic and Monetary Affairs of the European Parliament
Related- 30 March 2022
- 30 March 2022
-
Digital Euro Investigation Phase document
- 30 March 2022
-
Press releaseRelated
- 30 March 2022
-
Digital Euro Investigation Phase document
- 30 March 2022
- 30 March 2022
-
Digital Euro Investigation Phase documentAnnexes
- 30 March 2022
-
Digital Euro Investigation Phase document
Related- 30 March 2022
- 30 March 2022
- 30 March 2022
-
SpeechDetails
- Subtitle:
- Speech by President Christine Lagarde at an event organised by the Central Bank of Cyprus
- 29 March 2022
-
Weekly financial statementAnnexes
- 29 March 2022
-
Weekly financial statement - Commentary
- 29 March 2022
-
InterviewDetails
- Subtitle:
- Interview with Philip R. Lane, Member of the Executive Board of the ECB, conducted by Johanna Treeck and Suzanne Lynch on 28 March
- 28 March 2022
- 28 March 2022
-
Survey of Monetary Analysts
- 26 March 2022
-
InterviewDetails
- Subtitle:
- Interview with Christine Lagarde, President of the ECB, conducted by Theano Theiopoulou and published on 27 March 2022
- 25 March 2022
-
Governing Council decisions - Other decisions
- 25 March 2022
-
Monetary developments in the euro areaAnnexes
- 24 March 2022
- 24 March 2022
-
SpeechProportioning policy action to the evidence: making the monetary policy strategy of the ECB concreteDetails
- Subtitle:
- Keynote speech by Frank Elderson, Member of the Executive Board of the ECB and Vice-Chair of the Supervisory Board of the ECB, The Institute of International & European Affairs webinar
- 24 March 2022
-
Economic Bulletin
- 24 March 2022
-
Economic Bulletin - BoxEconomic Bulletin Issue 2, 2022Details
- Abstract:
- This box reviews the inventory cycle in the euro area, which normally is procyclical and notoriously volatile. The annual change in stocks of finished goods in manufacturing, based on PMI data, points to a continued positive inventory contribution to GDP growth in the first quarter of 2022. While fluctuations in this contribution generally reflect adjustments to cyclical changes in supply and demand, the current acceleration in stockbuilding could also reflect a “bullwhip effect”. This occurs where, as a precaution, manufacturing firms tend to hoard inventories of inputs, and at times inflate orders compared with actual needs, when faced with high demand and uncertainty about the supply of inputs. Looking ahead, short-term indicators and evidence from the ECB’s regular dialogue with non-financial companies point to further re-stocking needs, although the pace of such inventory building would depend on the resolution of the prevailing supply-side constraints.
- JEL Code:
- F44,G31,R41
- 24 March 2022
-
Economic Bulletin - BoxEconomic Bulletin Issue 2, 2022Details
- Abstract:
- This box analyses the development of the saving ratios of non-financial corporations in the euro area and in the largest euro area countries during the coronavirus pandemic. It shows that euro area corporate saving ratios came under pressure at the start of the pandemic but have reached record highs in recent quarters. Business saving has outpaced investment, resulting in historically high net lending of non-financial corporations. Given the importance of savings as an internal source of finance for investment and the high levels of the saving-to-investment ratio and net lending position of non-financial corporations, the prospects for business investment currently look positive from an internal funding perspective.
- JEL Code:
- E21,E22,E32
- 24 March 2022
-
Economic Bulletin - BoxEconomic Bulletin Issue 2, 2022Details
- Abstract:
- This box describes the ECB’s liquidity conditions and monetary policy operations during the seventh and eighth maintenance periods of 2021 from 3 November 2021 to 8 February 2022.
- JEL Code:
- E40,E52,E58
- 24 March 2022
-
Economic Bulletin - BoxEconomic Bulletin Issue 2, 2022Details
- Abstract:
- Strains in global supply chains of goods have been weighing on the global business cycle since late 2020. Given the multifaceted nature of supply bottlenecks, this box uses a relatively large set of indicators to track their causes. These indicators can help identify any signs of improvement or deterioration in specific economic sectors at an earlier stage. These sectoral indicators are represented in the form of heatmaps for the euro area and the United States. Recent data suggest that supply bottlenecks remain at historically high levels in both economies but may be starting to ease.
- JEL Code:
- C30,E32,F60
- 24 March 2022
-
Economic Bulletin - ArticleEconomic Bulletin Issue 2, 2022Details
- Abstract:
- Recent tensions in China’s real estate market have highlighted the risks inherent in the country’s highly leveraged corporate sector. These risks have been building up for some time, as high investment rates have coincided with high levels of debt accumulation. Moreover, the source of debt has moved beyond the traditional banking sector, with non-bank financial institutions providing financing which is less stable and more susceptible to sudden changes in investor sentiment. In addition, tensions in large corporate sectors could be transmitted to the rest of the economy through a number of channels. These channels include households, which are themselves increasingly leveraged and whose wealth is significantly exposed to the real estate market. A wider Chinese growth slowdown could, in turn, have global repercussions, given the size of the Chinese economy, its important global trade linkages and the central role it plays in international commodity markets. Against this backdrop, this article will review the rise in financial risks in China’s economy stemming from increasing private sector leverage, the interconnectedness between the financial and non-bank financial sectors, and households’ rising debt exposures.
- JEL Code:
- E5,E6,G2,G5
- 24 March 2022
-
Research Bulletin - Issue No. 93Details
- Abstract:
- A survey among former ECB policymakers about the Bank’s monetary policy communication provides broad support for recent innovations in communication practices. It suggests that communication with expert audiences is generally adequate. Nevertheless, it highlights room for improvement along several dimensions, in particular in communication with the wider public.
- JEL Code:
- E52,E58
- 23 March 2022
-
Economic Bulletin - BoxEconomic Bulletin Issue 2, 2022Details
- Abstract:
- Notwithstanding the recent pick-up in corporate spreads in some markets, global corporate bond prices stand close to historical highs amid relatively low credit risk premia, particularly in lower-rated segments. At the same time, the COVID‑19 pandemic has increased the vulnerability and indebtedness of many firms around the world, with corporate credit ratings remaining below pre‑pandemic levels and some firms exhibiting relatively weak profitability. The model-based valuation analysis presented in this box suggests that the strong overall decline in global corporate bond spreads since the peak of the pandemic has been only partly driven by the market’s assessment of improving credit quality and could, to a large extent, be related to the strength of investors’ risk appetite. Based on analysis of bond-level valuations in the US corporate market, the box also shows that market-wide risk-off shocks have the potential to significantly increase corporate spreads and expected default probabilities, particularly for the weakest firms.
- JEL Code:
- G12,G14
- 23 March 2022
-
Economic Bulletin - ArticleEconomic Bulletin Issue 2, 2022Details
- Abstract:
- The negative impact of the pandemic on the euro area corporate sector has been mitigated by an effective monetary, fiscal and supervisory policy response. This is also reflected in a low number of corporate insolvency cases. Looking ahead, the balance sheet health of firms and, by extension, the asset quality of banks hinge on the strength of the economic recovery and the financing conditions for firms. Higher corporate indebtedness could dampen investment, posing a risk to the economic recovery. For small and medium-sized enterprises, the pandemic could add to pre-existing vulnerabilities. Structural policies to improve the business environment, including policies aimed at broadening the sources of funding available to firms beyond debt financing, could support sustainable investment growth.
- JEL Code:
- E22,F34,G32
- 23 March 2022
-
Euro area pension fund statisticsAnnexes
- 22 March 2022
-
Euro area pension fund statistics
- 22 March 2022
-
Weekly financial statementAnnexes
- 22 March 2022
-
Weekly financial statement - Commentary
- 22 March 2022
-
SpeechDetails
- Subtitle:
- Welcome address by Fabio Panetta, Member of the Executive Board of the ECB, at the Fourth Annual Joint Conference of the Deutsche Bundesbank, European Central Bank and Federal Reserve Bank of Chicago on CCP Risk Management
- 22 March 2022
-
Balance of payments (monthly)
- 22 March 2022
-
Economic Bulletin - BoxEconomic Bulletin Issue 2, 2022Details
- Abstract:
- In January 2022, Eurostat began publishing official euro area aggregates as part of its Owner-Occupied Housing Price Index (OOHPI). This box looks at the various sub-components of that index, offering a cross-country perspective and analysing their correlation with other price indicators at euro area level.
- JEL Code:
- C43,E31,E51
- 21 March 2022
-
Economic Bulletin - BoxThe labour market recovery in the euro area through the lens of the ECB Consumer Expectations SurveyEconomic Bulletin Issue 2, 2022Details
- Abstract:
- This box analyses the current labour market recovery using data from the ECB Consumer Expectations Survey (CES). The CES allows for unique insights into the expectations and perceptions of labour market participants in the largest six countries of the euro area. We show that discouragement and unemployment perceptions declined as labour market conditions improved, while job-to-job transitions increased and so did earnings expectations. Despite the severity of the COVID-19 crisis there is no strong evidence in CES survey responses of a substantial deterioration in skill match and job satisfaction.
- JEL Code:
- E24,J62
- 20 March 2022
-
InterviewDetails
- Subtitle:
- Interview with Luis de Guindos, Vice-President of the ECB, conducted by Frank Wiebe and Jan Mallien on 14 March
- 18 March 2022
- 17 March 2022
-
SpeechDetails
- Subtitle:
- Speech by Isabel Schnabel, Member of the Executive Board of the ECB, at a panel on “Monetary Policy and Climate Change” at The ECB and its Watchers XXII Conference
Annexes- 17 March 2022
-
Speech
- 17 March 2022
-
SpeechDetails
- Subtitle:
- Presentation by Philip Lane, Member of the Executive Board of the ECB, at “The ECB and Its Watchers XXII” conference
- 17 March 2022
-
Working Paper Series - Issue No. 2657Details
- Abstract:
- We present a quarterly narrative database of important labour market reforms in selected euro area economies in between 1995 and 2018 covering 60 events. We provide legal adoption and implementation dates of major reforms to employment protection legislation and unemployment benefits. Estimates based on local projections find negative short-run effects of liberalising reforms on wages, while the employment effects of reforms differ markedly across age groups and partly depend on the state of the economy.
- JEL Code:
- J08,O43
- 17 March 2022
-
SpeechDetails
- Subtitle:
- Speech by Christine Lagarde, President of the ECB, at “The ECB and Its Watchers XXII” conference
- 15 March 2022
-
SpeechDetails
- Subtitle:
- by Christine Lagarde, President of the ECB, at the “Wirtschaftsgipfel” of Welt/Axel Springer in Berlin
- 15 March 2022
-
Weekly financial statementAnnexes
- 15 March 2022
-
Weekly financial statement - Commentary
- 14 March 2022
-
Working Paper Series - Issue No. 2656Details
- Abstract:
- Regarding a prospective reform of the European Stability and Growth Pact (SGP) it seems rather consensual that a simplified framework should take account of the prevailing macroeconomic context and enhance the balancing of sustainability and stabilisation considerations. This paper provides simulation analysis for the euro area and individual countries with a view to assessing the short- and longer-term budgetary and macroeconomic implications of a move to a two-tier system with an expenditure growth rule as single operational indicator linked to a debt anchor. Compared to the status quo, our analysis suggests that expenditure growth targets which take account of the ECB’s symmetric 2% inflation target can improve the cyclical properties of the framework. Fiscal policy would be tighter when inflation is above the target but looser when inflation is below target, resulting in a better synchronisation of fiscal and monetary policies. Providing additional fiscal accommodation in a low inflation environment would enable monetary policy to operate more effectively especially in the vicinity of the effective lower bound. The link to a longer-term debt anchor at the same time ensures a transition towards the Treaty’s debt reference level.
- JEL Code:
- E63,H50,H60
- 14 March 2022
-
Working Paper Series - Issue No. 2655Details
- Abstract:
- We investigate whether ideology drives the sentiments of parliamentarians when they speak to the central bank they hold accountable. To this end, we collect textual data on the quarterly hearings of the ECB President before the European Parliament from 1999 to 2019. We apply sentiment analysis to more than 1,900 speeches of individual Members of the European Parliament (MEPs) from 128 parties. We find robust evidence that MEPs’ sentiments toward the ECB are correlated with the ideological stance predominantly on a pro-/anti-European dimension rather than on a left-right dimension.
- JEL Code:
- E02,E52,E58
- 14 March 2022
-
SpeechDetails
- Subtitle:
- Keynote speech by Frank Elderson, Member of the Executive Board of the ECB and Vice-Chair of the Supervisory Board of the ECB, 14th European Bank Institute Policy Webinar on the ECB’s supervisory approach on climate-related and environmental risks
- 14 March 2022
-
Survey of Monetary Analysts - Aggregate results
- 11 March 2022
- 11 March 2022
- 11 March 2022
- 11 March 2022
- 11 March 2022
-
Other publication
- 11 March 2022
-
Working Paper Series - Issue No. 2654Details
- Abstract:
- In recent years there has been growing attention on the risks posed by climate change. One relevant question for financial stability is to which extent the materialisation of transition risks emerging from the sudden implementation of climate change mitigation policies would impact the financial system. In this paper we analyze the effects of changes in carbon price on the European banking system. We assess this climate change transition risk through a banking sector contagion model where firms are negatively impacted by an increase in carbon prices. Using a unique granular dataset we evaluate the consequences of a combination of different increases in carbon prices and firm emission reduction strategies. We find that taking early policy action, implying more gradual changes in carbon prices, is not expected to lead to adverse impacts on the banking system, especially if firms reduce their emissions efficiently. Conversely, a disorderly, abrupt transition to a low carbon economy requiring very high sudden changes in carbon prices might have disruptive effects on the financial system, especially if firms fail to reduce their emissions.
- JEL Code:
- Q48,Q54,Q58
- 11 March 2022
-
Working Paper Series - Issue No. 2653Details
- Abstract:
- During the Great Recession, unemployment increased substantially across several euro area countries, with wages exhibiting a muted response. As low skilled workers lose their jobs first during a recession, the remaining employed workers result in a relatively more skilled employment pool. This change in the composition of the employed workers inflates the aggregate wage mechanically, even in the case of no actual pay rises. This paper uses individual level data to control for the effect of changes in the composition of workers on wages and wage cyclicality. We find that compositional effects are highly correlated with the severity of the business cycle, being significant in countries where employment losses were larger. Thus, the results partially explain the muted response of the observed wages to the business cycle, as wages decreased more than what the aggregate numbers suggest during the downturn, a picture that is reversed somewhat during the recent recovery.
- JEL Code:
- J30,E32
- 10 March 2022
-
PodcastRelated
- 10 March 2022
-
Monetary policy statementDetails
- Subtitle:
- Christine Lagarde, President of the ECB,
Luis de Guindos, Vice-President of the ECB
- 10 March 2022
-
Macroeconomic projections for the euro areaAnnexes
- 10 March 2022
-
Macroeconomic projections for the euro area
- 10 March 2022
-
Combined monetary policy decisions and statementRelated
- 10 March 2022
-
Monetary policy statement
- 10 March 2022
-
Monetary policy decision
- 10 March 2022
-
Monetary policy statementDetails
- Subtitle:
- Christine Lagarde, President of the ECB,
Luis de Guindos, Vice-President of the ECB
Related- 10 March 2022
-
Combined monetary policy decisions and statement
- 10 March 2022
- 10 March 2022
-
Monetary policy decisionRelated
- 10 March 2022
-
Combined monetary policy decisions and statement
- 10 March 2022
-
Euro area securities issues statisticsAnnexes
- 10 March 2022
-
Euro area securities issues statistics
- 10 March 2022
-
Euro area securities issues statistics
- 9 March 2022
-
Digital Euro Investigation Phase documentAnnexes
- 9 March 2022
-
Digital Euro Investigation Phase document
- 9 March 2022
-
Digital Euro Investigation Phase document
- 8 March 2022
-
Weekly financial statementAnnexes
- 8 March 2022
-
Weekly financial statement - Commentary
- 3 March 2022
-
Monetary policy account
- 3 March 2022
-
MFI interest rate statistics
- 2 March 2022
-
SpeechDetails
- Subtitle:
- Speech by Philip R. Lane, Member of the Executive Board of the ECB, at the Hertie School, Berlin
- 2 March 2022
-
Press release
- 2 March 2022
-
Working Paper Series - Issue No. 2652Details
- Abstract:
- The investment fund sector has expanded dramatically since the crisis of 2008-2009. As the sector grows, so do the implications of its risk-taking for the wider financial system and real economy. This paper provides empirical evidence for the existence of widespread risk-taking incentives in the investment fund sector, with a particular focus on incentives for synchronised, cyclical risk-taking which could have systemic effects. Incentives arise from the positive response of investors to returns achieved through cyclical risk-taking and non-linearities in the relationship between fund returns and fund flows, which may keep managers from fully internalising the effects of adverse outcomes on their portfolios. The fact that market discipline may not be sufficient to ensure prudential behaviour among managers, combined with the externalities of this risk-taking for the wider system, creates a clear case for macroprudential regulatory intervention.
- JEL Code:
- G23,G11,G28
- 2 March 2022
-
Occasional Paper Series - Issue No. 290Details
- Abstract:
- In the aftermath of the global financial crisis, central banks started being confronted with severe challenges that led to an unprecedented policy response in terms of the size and variety of monetary policy measures. One such measure centred on central banks communicating to the public more explicitly their future policy actions in order to influence expectations. In the case of interest rates, as the standard policy rate approached the effective lower bound, major central banks began providing forward guidance (FG) on interest rates with the intention of lowering expectations of future short-term rates. While FG had been used in certain jurisdictions before the crisis, its prominence in the monetary policy toolkit grew substantially in the aftermath of the crisis. This occasional paper summarises the work carried-out by the Eurosystem Taskforce on the macroeconomic impact of rate forward guidance (FG) in an environment of large central bank balance sheets. The analysis presented covers the period up to February 2020 so the implications of the pandemic as well as the ECB’s strategy review are beyond the scope of the Taskforce’s mandate. The paper describes the analytical challenges associated with assessing rate FG on account of the relative novelty of these policies, the lack of well-established empirical results and the sensitivity of model predictions to the expectations formation process. To overcome and address these challenges, the Taskforce took stock of all the available infrastructure and analysis within in the Eurosystem, and where needed, developed structural and empirical models and approaches to assess the macroeconomic impact of rate FG in an environment of large central bank balance sheets.
- JEL Code:
- E37,E43,E52,E58
- 2 March 2022
-
Euro area insurance corporations statisticsAnnexes
- 2 March 2022
-
Euro area insurance corporations statistics
- 1 March 2022
-
Weekly financial statementAnnexes
- 1 March 2022
-
Weekly financial statement - Commentary
- 1 March 2022
-
Euro money market statistics
- 28 February 2022
-
SpeechDetails
- Subtitle:
- Speech by Fabio Panetta, Member of the Executive Board of the ECB, at an online seminar organised by the Robert Schuman Centre for Advanced Studies and Florence School of Banking and Finance at the European University Institute
Annexes- 28 February 2022
-
Speech
- 28 February 2022
-
Working Paper Series - Issue No. 2651Details
- Abstract:
- This paper analyses how labour market heterogeneity affects unemployment, productivity and business cycle dynamics that are relevant for monetary policy. The model matches remarkably well the short and long run dynamics of skilled and unskilled workers. Skill mismatch and skill-specific labour market institutions have three main effects on business cycles and growth dynamics. First, as the composition of labour market skills leads to supply segmentation, the relative scarcity of skilled workers increases the natural rate of unemployment and reduces total factor productivity with long-run effects on the growth rate of output. Second, skill heterogeneity in the labour market generates asymmetric outcomes and ampli.es measures of employment, wages and consumption inequality. Finally, the model provides important insights for the Phillips and Beveridge curves. Skill-specific labour market heterogeneity leads to a flattening of the Phillips curve as wages and unemployment are affected differently across skill types. Also, the model generates sideward shifts of the Beveridge curve following business cycle shocks that are related to the degree of skill heterogeneity.
- JEL Code:
- E24,E3,E5,O41,J64
- 28 February 2022
-
Working Paper Series - Issue No. 2650Details
- Abstract:
- We match firm-corporate governance characteristics with firm-level carbon dioxide (CO2) emissions over the period 2009-2019 to study the relationship between gender diversity in the workplace and firm carbon emissions. We find that a 1 percentage point increase in the percentage of female managers within the firm leads to a 0.5% decrease in CO2 emissions. We document that this effect is statically significant, also when controlling for institutional differences caused by more patriarchal and hierarchical cultures and religions. At the same time, we show that gender diversity at the managerial level has stronger mitigating effects on climate change if females are also well-represented outside the organization, e.g. in political institutions and civil society organizations. Finally, we find that, after the Paris Agreement, firms with greater gender diversity reduced their CO2 emissions by about 5% more than firms with more male managers.
- JEL Code:
- G12,G23,G30,D62,Q54
- 25 February 2022
- 25 February 2022
-
Working Paper Series - Issue No. 2649Details
- Abstract:
- Exploiting the introduction of the ECB’s tiering system for remunerating excess reserve holdings, we document the importance of access to the money market for bank lending. We show that the two-tier system produced positive wealth effects for banks with excess reserves and encouraged a reallocation of liquidity toward banks with unused exemptions. This ultimately decreased the fragmentation in the money market and enhanced the monetary policy transmission mechanism. The increased access to money market by banks with unused allowances incentivizes them to extend more credit than other banks, including banks with excess liquidity whose valuations increase the most.
- JEL Code:
- G2,E5
- 25 February 2022
-
Monetary developments in the euro areaAnnexes
- 25 February 2022
-
Monetary developments in the euro area
- 25 February 2022
-
Digital Euro Investigation Phase document
- 24 February 2022
-
SpeechDetails
- Subtitle:
- Speech by Isabel Schnabel, Member of the Executive Board of the ECB, at a virtual policy panel on “Unwinding QE” at the first annual Bank of England Agenda for Research (BEAR) conference
Annexes- 24 February 2022
-
Speech
- 24 February 2022
-
Working Paper Series - Issue No. 2648Details
- Abstract:
- The purpose of this paper is to investigate the main drivers of the change in the credit risk provisions at a portfolio level for the banks that have been subject of the 2018 EBA stress tests. Therefore, we perform a holistic review of the drivers of the three-year projections of credit losses. First, we define a model containing all the macroeconomic variables considered by the EBA methodological approach. By adding a three-dimension set of explanatory variables, entity-, banking sector- and portfolio-level aspects, we verify whether the published results show some kind of relation with these explanatory variables. Our results show that, although EBA variables explain most part of credit risk provisions, we obtain evidence about the role played by bank-level variables, banking sector features in each country, and the specific characteristics of the portfolio in explaining part of the provisions. Moreover, the results also indicate the existence of complementary/substitution effects of both bank- and portfolio-level variables with the characteristics of the banking sector when explaining credit risk provisions.
- JEL Code:
- G20,G21,G28
- 24 February 2022
-
Working Paper Series - Issue No. 2647Details
- Abstract:
- Recent research developed under the ECB research task force on Monetary Policy, Macroprudential Policy and Financial Stability highlights the existence of trade-offs and spillovers that monetary policy and macroprudential authorities face when deciding on their policy interventions. Monetary policy measures are key to support the supply of credit to the economy, but they could also have unintended consequences on financial stability risks. Macroprudential policies are instead effective in limiting financial stability risks, but they could also reduce the length of economic expansions by preventing credit from flowing to productive economic activities. In addition, since monetary and macroprudential policies transmit to the broad economy via the financial system, they unavoidably affect each other’s effectiveness. Taking these factors into account is key for the design and implementation of both policies.
- JEL Code:
- E3,E44,G01,G21
- Network:
- Research Task Force (RTF)
- 24 February 2022
-
Discussion Paper Series - Issue No. 18Details
- Abstract:
- Recent research developed under the ECB research task force on Monetary Policy, Macroprudential Policy and Financial Stability highlights the existence of trade-offs and spillovers that monetary policy and macroprudential authorities face when deciding on their policy interventions. Monetary policy measures are key to support the supply of credit to the economy, but they could also have unintended consequences on financial stability risks. Macroprudential policies are instead effective in limiting financial stability risks, but they could also reduce the length of economic expansions by preventing credit from flowing to productive economic activities. In addition, since monetary and macroprudential policies transmit to the broad economy via the financial system, they unavoidably affect each other’s effectiveness. Taking these factors into account is key for the design and implementation of both policies.
- JEL Code:
- E3,E44,G01,G21
- 24 February 2022
-
Research Bulletin - Issue No. 92Details
- Abstract:
- There are always trade-offs to weigh up when taking monetary and macroprudential policy actions. Thechoice is between supporting the economy by ensuring a smooth supply of credit at favourableconditions, on the one hand, and containing financial stability risks, on the other hand. There are alsosignificant spillovers between the two policies since they are both implemented and transmitted throughthe financial system. Monetary and macroprudential authorities need to take these interactions intoaccount when deciding on interventions. Indeed, there are clear advantages of accounting for financialstability considerations when taking monetary policy decisions and limiting the constraints on the practicalimplementation of macroprudential policy.
- JEL Code:
- E31
- Network:
- Research Task Force (RTF)
- 23 February 2022
-
InterviewDetails
- Subtitle:
- Interview with Philip R. Lane, Member of the Executive Board of the ECB, conducted by Gerald Braunberger and Christian Siedenbiedel on 21 February
- 23 February 2022
-
SpeechDetails
- Subtitle:
- Welcome address by Frank Elderson, Member of the Executive Board of the ECB and Vice-Chair of the Supervisory Board of the ECB, during a seminar presenting the ECB Opinions on the proposed regulation establishing the AML/CFT Authority, AML Regulation, the sixth AML Directive and the Funds and Crypto-assets Transfers Regulation
- 23 February 2022
-
SpeechDetails
- Subtitle:
- Contribution by Frank Elderson, Member of the Executive Board of the ECB and Vice-Chair of the Supervisory Board of the ECB, on the panel “Sustainable finance: what is expected from transition scenarios?” at the Eurofi High Level Seminar 2022
- 22 February 2022
-
Weekly financial statementAnnexes
- 22 February 2022
-
Weekly financial statement - Commentary
- 21 February 2022
-
Survey of Monetary Analysts
- 21 February 2022
-
Press releaseRelated
- 21 February 2022
-
Survey on credit terms and conditions in euro-denominated securities financing and OTC derivatives marketsAnnexes
- -
-
Other publication
- 20 February 2022
- 18 February 2022
-
SpeechDetails
- Subtitle:
- Contribution by Fabio Panetta, Member of the Executive Board of the ECB, to a panel discussion on central bank digital currencies at the US Monetary Policy Forum
- 18 February 2022
-
Governing Council decisions - Other decisions
- 18 February 2022
-
SpeechDetails
- Subtitle:
- Keynote speech by Frank Elderson, Member of the Executive Board of the ECB and Vice-Chair of the Supervisory Board of the ECB, Industry outreach on the thematic review on climate-related and environmental risks
- 18 February 2022
-
T2S Harmonisation progress report - Issue No. 12
- 18 February 2022
-
Euro area investment fund statisticsAnnexes
- 18 February 2022
-
Euro area investment fund statistics
- 18 February 2022
-
Euro area financial vehicle corporation statisticsAnnexes
- 18 February 2022
-
Euro area financial vehicle corporation statistics
- 18 February 2022
-
Balance of payments (monthly)
- 17 February 2022
-
SpeechDetails
- Subtitle:
- Opening remarks by Philip R. Lane, Member of the Executive Board of the ECB, at MNI Market News Webcast
- 17 February 2022
-
Working Paper Series - Issue No. 2646Details
- Abstract:
- We propose a new methodology to identify aggregate demand and supply shocks in the bank loan market. We present a model of sticky bank-firm relationships, estimate its structural parameters in euro area credit register data, and infer aggregate shocks based on those estimates. To achieve credible identification, we leverage banks’ exposure to various sectors’ heterogeneous liquidity needs during the COVID-19 Pandemic. We find that developments in lending volumes following the pandemic were largely explained by demand shocks. Fluctuations in lending rates were instead mostly determined by bank-driven supply shocks and borrower risk. A by-product of our analysis is a structural interpretation of two-way fixed effects regressions in loan-level data: according to our framework, firm- and bank-time fixed effects only separate demand from supply under certain parametric assumptions. In the data, the conditions are satisfied for supply but not for demand: bank-time fixed effects identify true supply shocks up to a time constant, while firm-time fixed effects are contaminated by supply forces. Our methodology overcomes this limitation: we identify supply and demand shocks at the aggregate and individual levels.
- JEL Code:
- E51,G21,G32
- 17 February 2022
-
Working Paper Series - Issue No. 2645Details
- Abstract:
- This paper shows that the liquidation value of collateral depends on the interdependency between borrower and collateral risk. Using transaction-level data on short-term repurchase agreements (repo), we show that borrowers pay a 1.1 to 2.6 basis points premium when their default risk is positively correlated with the risk of the collateral that they pledge. Moreover, we show that borrowers internalize this premium when making their collateral choices. Loan-level credit registry data suggest that the results extend to the corporate loan market as well.
- JEL Code:
- G21,G12,E43
- 17 February 2022
-
Annual consolidated balance sheet of the Eurosystem - Issue No. 2021Annexes
- 21 June 2022
-
Annual consolidated balance sheet of the Eurosystem
Related- 17 February 2022
-
Annual Accounts
- 17 February 2022
-
Press release
- 17 February 2022
-
Press releaseRelated
- 17 February 2022
-
Annual Accounts
- 17 February 2022
-
Annual consolidated balance sheet of the Eurosystem - Issue No. 2021
- 17 February 2022
-
Annual AccountsRelated
- 17 February 2022
-
Press release
- 28 April 2022
-
Annual Report
- 17 February 2022
-
Annual consolidated balance sheet of the Eurosystem - Issue No. 2021
- 17 February 2022
-
Economic Bulletin
- 17 February 2022
-
Economic Bulletin - BoxEconomic Bulletin Issue 1, 2022Details
- Abstract:
- This box reviews indexation schemes and other mechanisms for setting public wages and pensions across euro area countries. It concludes that price indexation of public wages is relatively limited, while public pensions are overwhelmingly automatically indexed, fully or partially, to prices and wages.
- JEL Code:
- E62,J3,H55
- 17 February 2022
-
Economic Bulletin - BoxEconomic Bulletin Issue 1, 2022Details
- Abstract:
- This box summarises the main findings from contacts between ECB staff and representatives of 74 leading non-financial companies operating in the euro area. The exchanges mainly took place between 10 and 19 January 2022. According to these contacts, overall activity was strong or growing across a range of sectors. However, supply constraints were still limiting firms’ ability to meet demand and generating pipeline price pressures, on top of which businesses faced surging energy costs. Most contacts expected wage growth to pick up somewhat this year. Given the cost pressures and continued strong customer demand, most contacts reported increasing prices and a more dynamic pricing environment, especially in the industrial sector.
- JEL Code:
- E2,E3,L2
- 17 February 2022
-
Economic Bulletin - BoxEconomic Bulletin Issue 1, 2022Details
- Abstract:
- This box assesses the role of migration in weak labour force developments during the COVID-19 pandemic. The labour force in the euro area remains well below the dynamics expected before the outbreak of the pandemic. This gap reflects both a weaker than expected growth in the working age population and a lower than expected labour force participation rate. Subdued net immigration may have contributed to these developments, with some foreign workers resettling in their home countries. It is likely that several factors have weighed on inward migration flows, including weaker employment prospects, travel restrictions and pervasive uncertainty induced by the pandemic. The share of foreign workers in the euro area may gradually converge towards the levels expected pre-pandemic, but risks are overall tilted to the downside.
- JEL Code:
- E32,J11,J21
- 17 February 2022
-
Economic Bulletin - BoxEconomic Bulletin Issue 1, 2022Details
- Abstract:
- This box shows that movements of firms along the productivity distribution over time have played a key role in explaining productivity developments in the euro area. The movement of firms along the productivity distribution is mainly driven by the capacity of firms to react to shocks and by incentives to innovate. This applies to both low-productivity firms that want to survive in the market and high-productivity firms that face the risk of falling behind the times. Interestingly, firm productivity has become less dynamic over time, which may reflect an increase in the average age of frontier firms and declining entry rates in the wake of higher market concentration. This decline in firm dynamism highlights the important role of structural policies in incentivising technological innovation and fostering the market entry of highly productive firms and the exit of less-productive firms.
- JEL Code:
- D22,D24,E24,D61
- 17 February 2022
-
SpeechDetails
- Subtitle:
- Presentation by Isabel Schnabel, Member of the Executive Board of the ECB, at a meeting organised by the Arbeitsgruppe Finanzen of the SPD-Bundestagsfraktion
- 16 February 2022
-
Working Paper Series - Issue No. 2644Details
- Abstract:
- While regulatory capital buffers are expected to be drawn to absorb losses and meet credit demand during crises, this paper shows that banks were unwilling to do so during the pandemic. To the contrary, banks engaged in forms of pro-cyclical behaviour to preserve capital ratios. By employing granular data from the credit register of the European System of Central Banks, we isolate credit supply effects and find that banks with little headroom above regulatory buffers reduced their lending relative to other banks, also when controlling for a broad range of pandemic support measures. Firms’ inability to reallocate their credit needs to less constrained banks had real economic effects, as their headcount went down, although state guarantee schemes acted as partial mitigants. These findings point to some unintended effects of the capital framework which may create incentives for pro-cyclical behaviour by banks during downturns. They also shed light on the interactions between fiscal and prudential policies which took place during the pandemic.
- JEL Code:
- E61,G01,G18,G21
- 16 February 2022
-
Working Paper Series - Issue No. 2643Details
- Abstract:
- This paper introduces the Consumer Expectations Survey (CES), a new online, high frequency panel survey of euro area consumers’ expectations and behaviour. The paper also investigates whether public perceptions about fiscal support measures introduced during the pandemic have influenced spending behaviour. We show that simple and factual information treatments about government support policies that are communicated to random subsets of respondents can help improve consumers’ perceptions about the adequacy of fiscal interventions relative to the perceptions of an untreated control group. We find evidence that this improvement in beliefs has a causal effect on consumer spending, in particular raising spending on large items like holidays and cars. Moreover, we show that such beliefs also influence household expectations about own income prospects, future access to credit and financial sentiment, while they do not affect expectations about future taxes, implying no evidence of Ricardian effects in household behaviour. We find that perceptions affect spending also among households that did not receive any government support, suggesting that fiscal interventions can have broader consequences as they influence the behaviour of groups beyond the targeted ones.
- JEL Code:
- D12,E21,H31
- 16 February 2022
-
Economic Bulletin - ArticleEconomic Bulletin Issue 1, 2022Details
- Abstract:
- The ECB’s monetary policy strategy review confirmed that the Harmonised Index of Consumer Prices (HICP) remains the appropriate price measure for assessing the achievement of the medium-term price stability objective. However, the Governing Council recognised that the inclusion of costs related to owner-occupied housing in the HICP would better represent the inflation rate that is relevant for households. This article elaborates on the topic of owner-occupied housing and its proposed inclusion in the HICP. It showcases the two options considered by the Governing Council, focusing on their statistical and conceptual properties. For the net acquisition approach recommended by the Governing Council, the article presents analytical indices based on ECB approximations that serve as a blueprint for the quarterly internal measure to be monitored. Finally, the article looks ahead to the incorporation of the costs of owner-occupied housing into the HICP and the associated challenges, noting that the current HICP will remain the main reference index for monetary policy during the transition period.
- JEL Code:
- C43,E31,E51
- 16 February 2022
-
Economic Bulletin - BoxEconomic Bulletin Issue 1, 2022Details
- Abstract:
- A recurring theme in the “ECB Listens” event conducted in the context of the monetary policy strategy review was the affordability of housing and the case for including related costs more adequately in the HICP. Housing costs can be analysed on the basis of different sources of data. This box reviews perceptions of housing costs among tenants and homeowners based on survey microdata, compares them with developments in housing costs based on macro price statistics, and highlights conceptual differences between the various measures that are important in the interpretation of the data.
- JEL Code:
- R21,R31,E31
- 15 February 2022
-
InterviewDetails
- Subtitle:
- Interview with Isabel Schnabel, Member of the Executive Board of the ECB, conducted by Martin Arnold on 14 February and published on 15 February
- 15 February 2022
-
Weekly financial statementAnnexes
- 15 February 2022
-
Weekly financial statement - Commentary
- 15 February 2022
-
Working Paper Series - Issue No. 2642Details
- Abstract:
- Consumers’ inflation expectations play a key role in the monetary transmission mechanism. As such, it is crucial for monetary policymakers to understand what they are and how they are formed. In this paper we introduce the (un)certainty channel as means to shed light on some of the more puzzling aspects of reported quantitative inflation perceptions and expectations. These include the apparent overestimation of inflation by consumers as well as the negative correlation observed between the economic outlook and inflation expectations. We also show that the uncertainty framework fits with some of the stylised facts of consumers’ inflation expectations, such as their correlation with socio-demographic characteristics and economic sentiment.
- JEL Code:
- D11,D12,D84,E31,E52
- 15 February 2022
-
Working Paper Series - Issue No. 2641Details
- Abstract:
- The paper quantitatively assesses the importance of supply-side drivers in the transition of the Japanese economy from low-skilled to high-skilled sectors and its implication for growth, labor demand and labor income shares. A sectoral supply-side system, estimated over the 1980-2012 period, reveals different rates of technical progress across production factors and sectors, but also heterogeneity in the sectoral elasticity of substitution between capital and labor. The fact that capital and labor are easily substitutable in low-skilled services but not in high-skilled services, coupled with the dominant role of capital-augmenting technical change in services is a key factor behind the relocation of labor towards high-skilled services, as well as behind the declining trend in the labor income share in low-skilled services.
- JEL Code:
- O47,O33,J23
- 15 February 2022
-
Press releaseAnnexes
- 15 February 2022
- 15 February 2022
-
Economic Bulletin - ArticleEconomic Bulletin Issue 1, 2022Details
- Abstract:
- The article takes stock of Next Generation EU (NGEU) from a euro area perspective. NGEU is a temporary crisis instrument that, if implemented successfully, is expected to significantly improve Europe’s economic prospects. In the short term, it should support the recovery of the EU economy. In the medium term, NGEU should help to modernise the EU economies, with positive effects on their growth potential, resilience and convergence. The article provides a synthesis of the fiscal measures and structural reforms embedded in the national recovery and resilience plans of euro area countries. It also looks at the economic impact of the planned investments. Finally, the article examines the novel governance approach that can sustain a successful implementation of NGEU.
- JEL Code:
- E62,E61,F47
- 15 February 2022
-
Economic Bulletin - BoxEconomic Bulletin Issue 1, 2022Details
- Abstract:
- This box reviews the dependence of the euro area on natural gas and provides an assessment of the impact of gas price increases and a possible rationing shock on activity. Natural gas is the second most important primary energy resource in the euro area and the most important in the manufacturing sector. More than 90% of the natural gas consumed in the euro area is imported. With indirect use in the early stages of production accounting for more than two-thirds of gas consumption, supply chain linkages significantly amplify the reaction of goods producers and services providers to gas price increases. An accounting framework based on input-output tables shows that the direct and indirect impact of a hypothetical 10% gas rationing shock would reduce euro area gross value added by about 0.7%. Illustrative simulations based on the ongoing surge in oil and gas prices and futures suggest that, by the end of 2022, euro area real GDP may be around 0.2% lower than its counterfactual level, with the effect likely peaking in the first quarter of this year.
- JEL Code:
- D45,D57,Q43
- 14 February 2022
-
SpeechDetails
- Subtitle:
- Introductory statement by Christine Lagarde, President of the ECB, at the plenary session of the European Parliament
- 14 February 2022
-
SpeechDetails
- Subtitle:
- Speech by Christine Lagarde, President of the ECB, at the plenary session of the European Parliament
- 14 February 2022
-
Working Paper Series - Issue No. 2640Details
- Abstract:
- We identify a novel dimension of monetary policy from high-frequency changes in asset prices around ECB policy events, orthogonal to surprises extracted from risk-free interest rates. We find that it is present in policy events that were interpreted by real-time market commentaries as containing information about asset purchase programmes aimed to stabilise financial markets and safeguard the monetary policy transmission by implementing asset purchases in a flexible manner across asset classes and euro area countries. We label this dimension of policy “market-stabilization QE” to contrast it with conventional QE programmes such as the APP launched by the ECB in 2015 aimed to extract duration risk. When including our market-stabilization QE, the R2 for the regression of sovereign yields during the sovereign debt crisis increases by about 50 percentage points and the one of the stock market by 35 percentage points; during the COVID-19 pandemic by 25 and 15 percentage points, respectively. Although it moves euro area stressed-country sovereign yields down and German sovereign yields up as a result of the reversal of flight-to-safety dynamics, it generates strong expansionary macroeconomic effects in all euro area countries including Germany.
- JEL Code:
- E43,E44,E52,E58,E65,G01,G14
- 14 February 2022
-
Working Paper Series - Issue No. 2639Details
- Abstract:
- We show that FinTech lending affects credit markets and real economic activity using a unique data set of a Peer-to-Business platform for which we have the universe of loan applications. We find that FinTech serves high quality and creditworthy small businesses who already have access to bank credit. Firms use FinTech to obtain long-term unsecured loans and reduce their exposure to banks with less liquid assets, stable funds, and capital. We find that access to FinTech spurs firm growth, employment and investment relative to firms that get their loan application rejected. In addition, firms with access to FinTech increase leverage and substitute long-term bank debt with FinTech debt. Our findings suggest that FinTech allows firms to preserve financial flexibility, reduce their bank dependence and exposure to banking shocks.
- JEL Code:
- G21,G23,O33
- 14 February 2022
-
Economic Bulletin - BoxEconomic Bulletin Issue 1, 2022Details
- Abstract:
- This box investigates potential long-term effects that current supply shortages could have on euro area potential output growth. Depending on the persistence of supply bottlenecks, firms might consider finding new supply chains. If this happens, sectors that have greatly benefited from international exposure and globalisation in terms of productivity growth might experience a decline in trend total factor productivity. All else being equal, this could lead to a trend decline in potential output growth for the most affected countries. The likelihood of such a scenario is highly difficult to assess. On the one hand, the high sunk costs of establishing global supply chains imply that reshoring would not take place at a larger scale if the coronavirus (COVID-19) pandemic is perceived to be temporary. On the other hand, a substantial shift in the geography of supply chains may occur because supply disruptions are very costly to firms. The challenges presented by this reorganisation process could be exacerbated if the pandemic encourages an increase in protectionism and de-globalisation. This box presents two scenarios, using historical elasticities between global value chain participation and trend total factor productivity growth, to give a flavour of the possible impact the current supply shortages could have on potential output.
- JEL Code:
- E32,F17,F60,O40
- 14 February 2022
-
Economic Bulletin - BoxEconomic Bulletin Issue 1, 2022Details
- Abstract:
- After headline inflation had already reached very high levels in the United States in the first half of 2021 and increased further to 7% in December, euro area inflation also recorded a very rapid increase in the second half of 2021 but remained much lower than in the United States at 5% in December and – according to Eurostat’s flash release – at 5.1% in January. Most of the difference in overall inflation developments has been due to the far stronger increase in inflation less energy and food (and from a higher starting point) in the United States than in the euro area. Large contributions from some special items – including used car prices – continue to play a key role for explaining differences in inflation excluding food and energy. Turning to underlying drivers of inflation developments, the United States is more advanced in the business cycle than the euro area and the US labour market has tightened, which has started to be reflected in some upward pressure on wages. However it should be kept in mind that the pandemic is a unique situation with considerable differences in inflation developments when compared with “normal” times, which require close monitoring and add to the uncertainty surrounding the inflation outlook in the United States as well as in the euro area. Upside surprises in inflation data releases have continued to be larger for the United States than for the euro area over recent quarters. Looking ahead, Consensus Economics forecasts expected inflation to remain below 2% in 2023 in the euro area but not in the United States and uncertainty around the outlook for inflation seemed to be much greater for the United States.
- JEL Code:
- E31,J3,E2,N10
- 11 February 2022
-
Survey of Monetary Analysts - Aggregate results
- 11 February 2022
-
Working Paper Series - Issue No. 2638Details
- Abstract:
- We consider a standard banking model with agency frictions to simultaneously study the weakening and reversal of monetary transmission and banks' risk-taking in a low-interest environment. Both, weaker monetary transmission and higher risk-taking arise because lower policy rates impair banks' net worth. The pass-through to deposit rates, the level of excess reserves and the extent of the agency problem between banks and depositors are crucial determinants of monetary transmission. If the deposit pass-through is sufficiently impaired, a reversal rate exists. For policy rates below the reversal rate further interest rate reductions lead to a disproportionate increase in risk-taking and a contraction in loan supply.
- JEL Code:
- G21,E44,E52
- Network:
- ECB Lamfalussy Fellowship Programme
- 11 February 2022
-
Working Paper Series - Issue No. 2637Details
- Abstract:
- We use mixed-frequency (quarterly-monthly) data to estimate a dynamic stochastic general equilibrium model embedded with the financial accelerator mechanism à la Bernanke et al. (1999). We find that the financial accelerator can work very differently at monthly frequency compared to the quarterly frequency, i.e. we document its inversion. That is because aggregating monthly data into quarterly leads to large biases in the estimated quarterly parameters and, as a consequence, to a deep change in the transmission of shocks.
- JEL Code:
- C52,E32,E52
- 10 February 2022
-
InterviewDetails
- Subtitle:
- Interview with Christine Lagarde, President of the European Central Bank, conducted by Andreas Niesmann and Tim Szent-Ivany
- 10 February 2022
- 10 February 2022
-
The ECB BlogDetails
- Subtitle:
- Looking at inflation dynamics, the relative price dislocations associated with bottlenecks are intrinsically short-term, Chief Economist Philip R. Lane writes in The ECB Blog. An increase in the relative price for a scarce item will stimulate new supply, while cooling demand.
- 10 February 2022
-
SpeechDetails
- Subtitle:
- Speech by Luis de Guindos, Vice-President of the ECB at the London School of Economics German Symposium
- 10 February 2022
-
Euro area securities issues statisticsAnnexes
- 9 February 2022
-
Euro area securities issues statistics
- 9 February 2022
-
Euro area securities issues statistics
- 9 February 2022
-
InterviewDetails
- Subtitle:
- Interview on Twitter with Isabel Schnabel, Member of the Executive Board of the ECB, conducted and published on 9 February 2022
- 8 February 2022
-
Weekly financial statementAnnexes
- 8 February 2022
-
Weekly financial statement - Commentary
- 7 February 2022
-
SpeechDetails
- Subtitle:
- Introductory statement by Christine Lagarde, President of the ECB, at the Hearing of the Committee on Economic and Monetary Affairs of the European Parliament (by videoconference)
Annexes- 7 February 2022
- 7 February 2022
- 7 February 2022
- 7 February 2022
- 7 February 2022
- 7 February 2022
- 7 February 2022
- 4 February 2022
-
€STR Transparency on errors
- 4 February 2022
-
Press releaseRelated
- 4 February 2022
-
Survey of Professional Forecasters
- 4 February 2022
-
Survey of Professional ForecastersAnnexes
- 4 February 2022
Related- 4 February 2022
- 3 February 2022
- 3 February 2022
- 3 February 2022
-
PodcastRelated
- 3 February 2022
-
Monetary policy statementDetails
- Subtitle:
- Christine Lagarde, President of the ECB,
Luis de Guindos, Vice-President of the ECB
- 3 February 2022
-
Combined monetary policy decisions and statementRelated
- 3 February 2022
-
Monetary policy statement
- 3 February 2022
-
Monetary policy decision
- 3 February 2022
-
Monetary policy statementDetails
- Subtitle:
- Christine Lagarde, President of the ECB,
Luis de Guindos, Vice-President of the ECB
Related- 3 February 2022
-
Combined monetary policy decisions and statement
- 3 February 2022
- 3 February 2022
-
Monetary policy decisionRelated
- 3 February 2022
-
Combined monetary policy decisions and statement
- 3 February 2022
-
MFI interest rate statistics
- 1 February 2022
-
Weekly financial statementAnnexes
- 1 February 2022
-
Weekly financial statement - Commentary
- 1 February 2022
-
Euro area bank lending survey - Issue No. 2021Annexes
- 1 February 2022
-
Euro area bank lending survey - Annex
Related- 1 February 2022
-
Press release
- 1 February 2022
-
Press release
- 28 January 2022
- 28 January 2022
-
Monetary developments in the euro areaAnnexes
- 27 January 2022
-
Euro area economic and financial developments by institutional sector (full)
- 26 January 2022
-
Research Bulletin - Issue No. 91Details
- Abstract:
- Homeownership among younger households has been decreasing in several major advanced economies. In this analysis, I show that increases in labour income inequality and uncertainty are key drivers of this trend. Confronted with high house prices and low, risky incomes, many young households cannot or do not want to risk making such a big, illiquid investment. As a result, they accumulate less wealth.
- JEL Code:
- D31,E21,E24,G11,J31
- 25 January 2022
-
Weekly financial statementAnnexes
- 25 January 2022
-
Weekly financial statement - Commentary
- 25 January 2022
-
InterviewDetails
- Subtitle:
- Interview with Philip R. Lane, Member of the Executive Board of the ECB, conducted by Emilis Linge and Dalius Simenas
- 21 January 2022
-
Macroprudential Bulletin - Focus - Issue No. 16Details
- Abstract:
- This impact assessment shows that a mandatory public debt holding would reduce the liquidity risk of private debt money market funds by increasing their shock absorption capacity and diversifying their asset liquidity profile. This would enable these funds to better mitigate the externalities associated with large-scale redemptions. The analysis also considers possible costs related to the funding of non-financial corporations and the attractiveness of MMFs as well as possible feasibility issues in terms of the supply of public debt.
- JEL Code:
- G23,G28,G01
- 21 January 2022
-
Macroprudential Bulletin - Article - Issue No. 16Details
- Abstract:
- This article assesses proposed reforms to the European Money Market Funds (MMF) Regulation to enhance the resilience of the sector. Specifically, the article provides a rationale for requiring private debt MMFs to hold higher levels of liquid assets, of which a part should be public debt, and considers the design and calibration of such a requirement. The article also proposes that the impediments to the use of liquidity buffers should be removed and authorities should have a role in releasing these buffers. Finally, while the removal of a stable net asset value for low-volatility MMFs would reduce cliff effects, we argue that this might not be necessary if liquidity requirements for these private debt MMFs are sufficiently strengthened.
- JEL Code:
- G23,G28,G01
- 20 January 2022
-
Monetary policy account
- 19 January 2022
- 19 January 2022
-
Balance of payments (monthly)
- 19 January 2022
-
Digital Euro Investigation Phase documentAnnexes
- 19 January 2022
-
Digital Euro Investigation Phase document
- 19 January 2022
-
Digital Euro Investigation Phase document
- 18 January 2022
-
Weekly financial statementAnnexes
- 18 January 2022
-
Weekly financial statement - Commentary
- 17 January 2022
-
Survey of Monetary Analysts
- 14 January 2022
-
InterviewDetails
- Subtitle:
- Interview with Isabel Schnabel, Member of the Executive Board of the ECB, conducted by Markus Zydra, Bastian Brinkmann and Meike Schreiber on 10 January 2022
- 14 January 2022
-
SpeechDetails
- Subtitle:
- Introductory statement by Christine Lagarde, President of the ECB, at the meeting of the Conference of Parliamentary Committees for Union Affairs of the Parliaments of the European Union (COSAC)
- 14 January 2022
-
€STR Annual Methodology Review
- 13 January 2022
-
Economic Bulletin
- 13 January 2022
-
Economic Bulletin - BoxEconomic Bulletin Issue 8, 2021Details
- Abstract:
- This box discusses the fiscal policy recommendations addressed to the euro area countries against the background of the coronavirus (COVID-19) crisis.
- JEL Code:
- E62,H6
- 13 January 2022
-
Economic Bulletin - BoxEconomic Bulletin Issue 8, 2021Details
- Abstract:
- This box describes the ECB’s liquidity conditions and monetary policy operations during the fifth and sixth maintenance periods of 2021 from 28 July 2021 to 2 November 2021.
- JEL Code:
- E40,E52,E58
- 13 January 2022
-
Economic Bulletin - BoxEconomic Bulletin Issue 8, 2021Details
- Abstract:
- This box presents a model-based approach for distinguishing between two unobserved components embedded in market-based measures of inflation compensation, namely inflation expectations and inflation risk premia. The approach relies on econometric models used to analyse the term structure of inflation-linked swap rates. Estimates indicate that the rise in inflation compensation observed since mid-2020 is attributable more to inflation risk premia than to inflation expectations. This suggests that the rise is mainly related to a shift in the inflation risks priced in, from lower than expected to higher than expected.
- JEL Code:
- E31,E43,E47
- 13 January 2022
-
Economic Bulletin - BoxEconomic Bulletin Issue 8, 2021Details
- Abstract:
- This box explores new indicators of the financing conditions faced by euro area companies, based on firm-level survey data. Drawing on the rich dataset provided by the survey on the access to finance of enterprises (SAFE), three synthetic indicators summarise how firms have perceived their financing conditions in the euro area since 2009. Overall, the indicators suggest there have been several important phases in firms’ perceptions of financing conditions, which relate closely to ECB monetary policy measures. The empirical analysis shows that, after the onset of the pandemic, firms’ perceptions of financing conditions played an increasingly important role in explaining their expectations of the future availability of bank loans.
- JEL Code:
- D22,H32
- 13 January 2022
-
Economic Bulletin - BoxEconomic Bulletin Issue 8, 2021Details
- Abstract:
- During the economic recovery from the COVID-19 pandemic, supply and demand imbalances have put a strain on global production networks. We develop a two-step vector autoregression (VAR) procedure to gauge the impact of supply chain shocks on activity, trade and prices. In the first step, we use a sign restricted structural VAR with PMI output and PMI delivery times to recover the supply chain shock, which is our proxy for measuring episodes of supply chain strains. In the second step, we plug such shocks as exogenous variables into a companion VAR with endogenous real and nominal variables. Counterfactual scenarios are constructed to assess the effects of the supply bottlenecks, which are having a negative impact on real variables and pushing up prices. A medium-term assessment of the supply chain strains is also provided.
- JEL Code:
- C32,E30,F40,F62
- 13 January 2022
-
Economic Bulletin - ArticleEconomic Bulletin Issue 8, 2021Details
- Abstract:
- Understanding the expectations of households, firms and financial markets regarding monetary policy and macroeconomic developments is important for the conduct of monetary policy. Surveys can play an important role in understanding expectations. The ECB Survey of Monetary Analysts (SMA) brings together information on financial sector expectations of monetary policy and macroeconomic developments in one coherently structured and regularly updated survey. The objective of the SMA is to “gather regular, comprehensive, structured and systematic information on market participants’ expectations”. The ECB launched the SMA as a pilot project in April 2019 and, after concluding the pilot phase, has published aggregate results since June 2021. This article looks at the structure of the survey and the rationale behind it and explains what role it plays in understanding changes in market participants’ expectations of euro area monetary policy and the macroeconomy.
- JEL Code:
- E5,E52,E58
- 12 January 2022
-
Occasional Paper Series - Issue No. 289Details
- Abstract:
- Global value chains (GVCs) have shaped the dynamics of globalisation in recent years. This paper reviews key concepts and tools to measure countries’ involvement in GVCs, explores recent trends and investigates the underlying drivers of GVC participation empirically. The analysis in the paper finds that in the last decade, GVCs have undergone an important transformation, with participation falling on the back of rising trade costs and the trade integration of some large emerging market economies slowing, while the role of recent technological developments remains unclear. In addition, supply chains appear to have become increasingly regional over time. The paper also offers an insight into the role of production chain linkages in the transmission of recent global shocks across countries, uncovering important amplification effects on trade and activity. Finally, it discusses future prospects for GVCs and global trade, including in the light of developments associated with the coronavirus pandemic.
- JEL Code:
- F13,F14,F15,F23,F62
- 12 January 2022
-
Euro area securities issues statisticsAnnexes
- 12 January 2022
-
Euro area securities issues statistics
- 12 January 2022
-
Euro area securities issues statistics
- 12 January 2022
-
Economic Bulletin - BoxEconomic Bulletin Issue 8, 2021Details
- Abstract:
- This box reviews how the ECB’s communication on the economic outlook has evolved over time and how it compares with that of two other major central banks. Standard metrics reveal that over time the communication on the economic outlook has gradually become clearer, making monetary policy more transparent and effective. The ECB’s communication differs from that of the Bank of England and the Federal Reserve Board, reflecting the differences in their monetary policy strategies. The ECB uses the term “money” more often, while the Bank of England and the Federal Reserve Board communicate the terms “unemployment” and “slack” more frequently. Textual analysis underscores the importance of narratives in communicating quantitative economic forecasts. To build informative narratives, the ECB relies on a wide range of economic models, tools and surveys.
- JEL Code:
- E30,E50
- 12 January 2022
-
Economic Bulletin - ArticleEconomic Bulletin Issue 8, 2021Details
- Abstract:
- How central banks communicate matters. Communication has become a key instrument to make policy more effective and improve central banks’ transparency and accountability, ultimately helping to build trust among the wider public whom they serve. As part of its recent strategy review, the ECB analysed how its communication, in particular with the wider public, can be improved. This article further complements the findings of the strategy review. The article aims to provide a better understanding of the ECB’s audiences among the wider public, what matters to them, and what happens between the sending and the receiving end of ECB communication. The findings point to possible avenues to make the ECB’s monetary policy communication more effective.
- JEL Code:
- E52,E58
- 11 January 2022
- 11 January 2022
-
Weekly financial statementAnnexes
- 11 January 2022
-
Weekly financial statement - Commentary
- 11 January 2022
-
SpeechDetails
- Subtitle:
- Welcome address by Christine Lagarde, President of the ECB, at a virtual ceremony marking the change of office of the President of the Bundesbank
- 11 January 2022
-
Working Paper Series - Issue No. 2636Details
- Abstract:
- Does the level of deposits matter for bank fragility and efficiency? By augmenting a standard model of endogenous bank runs with a consumption-saving decision, we obtain two novel results. First, depositors’ incentives to run are a function of the level of savings held as bank deposits. Second, a saving externality emerges in that individual depositors do not internalize the effect of their saving decisions on the bank-run probability. As a result, the economy features an inefficient level of savings and bank liquidity provision as well as excessive bank fragility. These results are robust to different sources of bank fragility, as they emerge both when runs are panic- and fundamental-driven.
- JEL Code:
- G01,G21,G28
- 11 January 2022
-
Occasional Paper Series - Issue No. 288Details
- Abstract:
- A key element of the European reform agenda is to simplify the EU fiscal governance framework by moving towards a single debt anchor and a single operational indicator as the basis for formulating fiscal targets and assessing compliance. This paper puts forward an in-depth analysis of two alternative fiscal performance indicators currently used in the EU fiscal framework: the change in the structural balance and the expenditure benchmark. Comparing these two indicators allows us to identify options for the design of a fiscal performance measure – such as assumptions on cyclical adjustment and the inclusion of fiscal variables – and assess their policy impact. Our paper finds that the expenditure benchmark used in the EU fiscal governance framework has advantages over the change in the structural balance. However, it still has scope for improvement. The paper also shows that taking account of interest payments in the expenditure benchmark would make fiscal policy more supportive of the monetary policy stance.
- JEL Code:
- C54,E62,E65,F54,F47
- 11 January 2022
-
Euro area economic and financial developments by institutional sector (early)
- 11 January 2022
-
Euro money market statistics
- 11 January 2022
-
Balance of payments (quarterly)
- 11 January 2022
-
Economic Bulletin - BoxEconomic Bulletin Issue 8, 2021Details
- Abstract:
- This box reviews the key factors that have been causing global supply chain disruptions and assesses their impact on euro area industrial production. After the exceptionally swift and strong rebound in global demand since the second half of 2020, supply has been increasingly unable to meet demand, with repercussions on euro area manufacturing production. Moreover, disruptions associated with container shipping, shortages of raw materials and semiconductors, as well as selective lockdown measures in key Asian countries, have also adversely affected the normal functioning of global supply chains. These disruptions are estimated to have reduced the level of euro area industrial production by 2.6% cumulatively between October 2020 and September 2021. Since this equates to around 20% of total value added, these estimates suggest that euro area GDP would have been around 0.5% higher in 2021 had it not been for the supply bottlenecks. This estimate can be considered a lower bound, as supply bottlenecks continued to affect production in the last quarter of 2021, as well as having an impact on construction and business services.
- JEL Code:
- C30,E32,F60
- 11 January 2022
-
InterviewDetails
- Subtitle:
- Interview with Philip R. Lane, Member of the Executive Board of the ECB, conducted by Isabella Bufacchi
- 10 January 2022
-
Economic Bulletin - BoxEconomic Bulletin Issue 8, 2021Details
- Abstract:
- Post-pandemic labour market developments in the United States and United Kingdom show that imbalances between labour demand and labour supply are causing a high and unusual tightness in the labour market for such an early stage in a recovery. This could translate into broad-based wage pressures, in turn posing a risk to inflation. Such pressures are becoming increasingly visible in the United States, but are less marked in the United Kingdom.
- JEL Code:
- E24
- 8 January 2022
-
SpeechDetails
- Subtitle:
- Remarks by Isabel Schnabel, Member of the Executive Board of the ECB, at a panel on “Climate and the Financial System” at the American Finance Association 2022 Virtual Annual Meeting
Annexes- 8 January 2022
-
Speech
- 7 January 2022
-
InterviewDetails
- Subtitle:
- Interview with Philip R. Lane, Member of the Executive Board of the ECB, conducted by Robert Shortt on 7 January and published on 7 January 2022
- 5 January 2022
-
Weekly financial statementAnnexes
- 5 January 2022
-
Weekly financial statement - Commentary
- 5 January 2022
-
MFI interest rate statistics
- 31 December 2021
-
The ECB BlogDetails
- Subtitle:
- Europe and the euro have become inseparable, President Christine Lagarde writes in The ECB Blog to mark the 20th anniversary of euro banknotes and coins. She recalls her first encounter with a euro banknote, and reflects on how far the euro has come and what lies ahead.
- 29 December 2021
-
Monetary developments in the euro areaAnnexes
- 29 December 2021
-
Monetary developments in the euro area
- 28 December 2021
-
Weekly financial statementAnnexes
- 28 December 2021
-
Weekly financial statement - Commentary
- 28 December 2021
-
Working Paper Series - Issue No. 2635Details
- Abstract:
- Standard New Keynesian (NK) models feature an optimal inflation target well below two percent, limited welfare losses from business cycle fluctuations and long-term monetary neutrality. We develop a NK framework with labour market frictions, endogenous productivity and downward wage rigidity (DWR) which challenges these results. The model features a non-vertical long-run Phillips curve between inflation and unemployment and a trade-off between price distortions and output hysteresis that change the welfare-maximizing inflation level. For a plausible set of parameters, the optimal inflation target is in excess of two percent, a target value commonly used across central banks. Deviations from the optimal target carry welfare costs multiple times higher than in traditional NK models. The main reason is that endogenous growth and DWR generate asymmetric and hysteresis effects on unemployment and output. Price level targeting or a Taylor-rule responding to the unemployment rate can handle better the asymmetric and hysteresis effects in our model and deliver significant welfare gains. Our results are robust to the inclusion of the effective lower bound on the monetary policy interest rate.
- JEL Code:
- E24,E3,E5,O41,J64
- 22 December 2021
-
Survey of Monetary Analysts - Aggregate results
- 22 December 2021
-
Working Paper Series - Issue No. 2634Details
- Abstract:
- We study exchange rate pass-through (ERPT), i.e., the impact of exchange rate movements on inflation, focusing on euro area import prices at a sectorally disaggregated level. Our estimation strategy is based on VAR-X models, thus incorporating both endogenous and exogenous explanatory variables. The impulse response functions not only allow to study the extent but also the dynamics of ERPT. We find that ERPT is heterogeneous in terms of magnitude across sectors. We further investigate what industry-specific characteristics affect the heterogeneity of ERPT. Across various model specifications including import penetration, market integration, competition and value chain integration, we find that higher market concentration and higher backward integration in global value chains decrease pass-through, in line with previous findings in the literature.
- JEL Code:
- C50,F30,F40
- 22 December 2021
-
Working Paper Series - Issue No. 2633Details
- Abstract:
- We study the relationship between fiscal policy and household saving across the euro area countries for the period 1999-2019. To this extent, we propose a thick modelling approach, which allows a vast number of model specifications in a dynamic panel setting. We find that fiscal expansions are associated with an increase in household saving rate in the euro area, which supports a partial, but not full, Ricardian equivalence channel. The relationship holds regardless of how we measure the (discretionary) fiscal policy impulse. The median saving offset across all baseline specifications is around 19% in the short run and 41% in the long run. Various robustness checks underpin the basic results, while also pointing to model and estimation uncertainty and no robust evidence for total private saving offset. Our results for the euro area are broadly in line with the literature, albeit they tend to yield a somewhat weaker evidence for the saving offset of fiscal policy, particularly in relation to earlier studies.
- JEL Code:
- D14,E62,H6
- 22 December 2021
-
Euro area pension fund statisticsAnnexes
- 22 December 2021
-
Euro area pension fund statistics
- 22 December 2021
-
InterviewDetails
- Subtitle:
- Interview with Isabel Schnabel, Member of the Executive Board of the ECB, conducted by Eric Albert on 16 December and published on 22 December
- 21 December 2021
-
Weekly financial statementAnnexes
- 21 December 2021
-
Weekly financial statement - Commentary
- 21 December 2021
-
Working Paper Series - Issue No. 2632Details
- Abstract:
- Monetary policy aims at affecting corporate borrowing by influencing the marginal costs of firms, but its potency can be conditioned by the degree of market competition. We first identify conditions under which changes in marginal costs may have different effects on credit constraints and output under different competitive environment, in a simple Cournot competition setting. We then exploit changes in monetary policy to examine whether the pass-through of borrowing costs is affected by market structure. First, we use as an experiment the announcement of the ECB Outright Monetary Transactions (OMT) program in a triple-differences specification. We show that small firms (which have low market power and higher credit constraints) in "stressed" countries (which benefited more from the policy) within less concentrated sectors experienced a larger reduction in credit constraints than similar firms in more concentrated sectors. Second, we exploit continuous state-of-the-art measures of monetary policy shocks to study how market structure affects pass-through to real variables, like investment and sales growth. We find evidence that firms with more market power respond less to monetary policy shocks. These results show that the interaction of borrowing capacity and market structure matters, and that concentration may have important effects on monetary policy transmission.
- JEL Code:
- D4,E4,E5,L1
- Network:
- Discussion papers
- 21 December 2021
-
Working Paper Series - Issue No. 2631Details
- Abstract:
- This paper explores how the need to transition to a low-carbon economy influences firm credit risk. It develops a novel dataset which augments data on firms’ green-house gas emissions over time with information on climate disclosure practices and forward-looking emission reduction targets, thereby providing a rich picture of firms’ climate-related transition risk alongside their strategies to manage such risks. It then assesses how such climate-related metrics influence two key measures of firms’ credit risk: credit ratings and the market-implied distance-to-default. High emissions tend to be associated with higher credit risk. But disclosing emissions and setting a forward-looking target to cut emissions are both associated with lower credit risk, with the effect of climate commitments tending to be stronger for more ambitious targets. After the Paris agreement, firms most exposed to climate transition risk also saw their ratings deteriorate whereas other comparable firms did not, with the effect larger for European than US firms, probably reflecting differential expectations around climate policy. These results have policy implications for corporate disclosures and strategies around climate change and the treatment of the climate-related transition risk faced by the financial sector.
- JEL Code:
- E58,G11,G32,Q51,Q56,C58
- 21 December 2021
-
Discussion Paper Series - Issue No. 17Details
- Abstract:
- Monetary policy aims at affecting corporate borrowing by influencing the marginal costs of firms, but its potency can be conditioned by the degree of market competition. We first identify conditions under which changes in marginal costs may have different effects on credit constraints and output under different competitive environment, in a simple Cournot competition setting. We then exploit changes in monetary policy to examine whether the pass-through of borrowing costs is affected by market structure. First, we use as an experiment the announcement of the ECB Outright Monetary Transactions (OMT) program in a triple-differences specification. We show that small firms (which have low market power and higher credit constraints) in "stressed" countries (which benefited more from the policy) within less concentrated sectors experienced a larger reduction in credit constraints than similar firms in more concentrated sectors. Second, we exploit continuous state-of-the-art measures of monetary policy shocks to study how market structure affects pass-through to real variables, like investment and sales growth. We find evidence that firms with more market power respond less to monetary policy shocks. These results show that the interaction of borrowing capacity and market structure matters, and that concentration may have important effects on monetary policy transmission.
- JEL Code:
- D4,E4,E5,L1
- 20 December 2021
- 20 December 2021
- 20 December 2021
- 20 December 2021
-
Letters to MEPs
- 20 December 2021
-
Working Paper Series - Issue No. 2630Details
- Abstract:
- We confront the notion that flexible rates insulate a country from external disturbances with new evidence on spillovers from euro-area shocks to neighboring countries. We find that in response to euro-area shocks, spillovers are not smaller, and currency movements not significantly larger, in countries that float their currency, relative to those that peg to the euro—the insulation puzzle. Unconditionally, however, currency volatility is significantly higher for floaters. A state-of-the-art open-economy model can fit our conditional evidence on lack of insulation, provided monetary policy targets headline inflation, but only at the cost of missing the unconditional evidence on currency volatility.
- JEL Code:
- F41,F42,E31
- 20 December 2021
-
Working Paper Series - Issue No. 2629Details
- Abstract:
- We confront five stylized facts related to sovereign default: 1) the presence of serial defaulters; 2) the prevalence of partial over complete default; 3) the counter-cyclicality of default; 4) non-linearity of sovereign spreads; and 5) heterogeneous outcomes among serial defaulters. In a model that integrates fiscal uncertainty and habit formation in policy, assuming incomplete financial markets, we demonstrate that default is habit and shock driven as well as non-strategic and involuntary. Moreover, there is no need for sanctions to sustain trading. Importantly, in spite of dealing with serial defaulters, partial default is a robust equilibrium. We characterize good and bad fiscal habits and, that with the latter, expected default increases with habit persistence. The impact of habits on the expected default rate is the opposite of its effect on both the interest rate on public debt and base interest of the economy. The presence of habits also has implications for the cost of debt, default risk premium and the cost of default, and can shed light on country heterogeneities.
- JEL Code:
- G18,H63
- 20 December 2021
-
Other publication - Issue No. 2021
- 20 December 2021
-
Balance of payments (monthly)
- 17 December 2021
-
Governing Council decisions - Other decisions
- 17 December 2021
- 17 December 2021
- 17 December 2021
-
Working Paper Series - Issue No. 2628Details
- Abstract:
- How does global risk impact the world economy? In taking up this question, we focus on the dollar’s role in the international adjustment mechanism. First, we rely on high-frequency surprises in the price of gold to identify the effects of global risk shocks in a Bayesian Proxy VAR model. They cause a synchronized contraction of global economic activity and appreciate the dollar. Other key financial indicators adjust in line with pre-dictions of recent theoretical work. Second, we illustrate through counterfactuals that the dollar appreciation amplifies the adverse impact of global risk shocks outside of the US via a financial channel.
- JEL Code:
- F31,F42,F44
- 17 December 2021
-
Working Paper Series - Issue No. 2627Details
- Abstract:
- This paper reports the results of a survey of former members of the Governing Council of the European Central Bank, which sought their views on monetary policy communication practices, the related challenges and the road ahead. Pronounced differences across the respondent groups are rare, suggesting that there is broad consensus on the various issues. Respondents view enhancing credibility and trust as the most important objective of central bank communication. They judge communication with financial markets and experts as extremely important and adequate, but see substantial room for improvement in the communication with the general public. The central bank objective is widely seen as the most important topic for monetary policy communication, and several respondents perceived a need for clarification of the ECB’s inflation aim, citing the ambiguity of the “below, but close to, 2%” formulation that was in place at the time of the survey.
- JEL Code:
- E52,E58
- 17 December 2021
-
Other publication - Issue No. 2021Details
- Subtitle:
- Analysis of high-level considerations and high-priority technical aspects
- 17 December 2021
- 17 December 2021
-
Other publication
- 16 December 2021
-
PodcastRelated
- 16 December 2021
-
Monetary policy statementDetails
- Subtitle:
- Christine Lagarde, President of the ECB,
Luis de Guindos, Vice-President of the ECB
- 16 December 2021
-
Macroeconomic projections for the euro areaAnnexes
- 16 December 2021
- 3 January 2022
-
Other publication
- 16 December 2021
-
Monetary policy statementDetails
- Subtitle:
- Christine Lagarde, President of the ECB,
Luis de Guindos, Vice-President of the ECB
Related- 15 December 2021
-
Combined monetary policy decisions and statement
- 16 December 2021
- 16 December 2021
-
Monetary policy decisionRelated
- 15 December 2021
-
Combined monetary policy decisions and statement
- 16 December 2021
- 15 December 2021
-
Combined monetary policy decisions and statementRelated
- 16 December 2021
-
Monetary policy statement
- 16 December 2021
-
Monetary policy decision
- 14 December 2021
-
Weekly financial statementAnnexes
- 14 December 2021
-
Weekly financial statement - Commentary
- 12 December 2021
- 10 December 2021
-
SpeechDetails
- Subtitle:
- Lecture by Fabio Panetta, Member of the Executive Board of the ECB
- 10 December 2021
-
Euro area securities issues statisticsAnnexes
- 10 December 2021
-
Euro area securities issues statistics
- 10 December 2021
-
Euro area securities issues statistics
- 8 December 2021
-
SpeechDetails
- Subtitle:
- Speech by Isabel Schnabel, Member of the Executive Board of the ECB, at the fifth annual conference of the European Systemic Risk Board
Annexes- 8 December 2021
-
Speech
- 8 December 2021
-
SpeechDetails
- Subtitle:
- Speech by Luis de Guindos, Vice-President of the ECB, at the 5th ESRB Annual Conference
- 8 December 2021
-
Working Paper Series - Issue No. 2626Details
- Abstract:
- We contribute to the debate surrounding central banks and climate change by investigating how extreme temperatures affect medium-term inflation, the primary objective of monetary policy. Using panel local projections for 48 advanced and emerging market economies (EMEs), we study the impact of country-specific temperature shocks on a range of prices: consumer prices, including the food and non-food components, producer prices and the GDP deflator. Hot summers increase food price inflation in the near term, especially in EMEs. But over the medium term, the impact across the various price indices tends to be either insignificant or negative. Such effect is largely non-linear, being more significant for larger shocks and at higher absolute temperatures. We also provide simulations from a two-country model to understand the rationale behind the results. Overall, our results suggest that temperature plays a non-negligible role in driving medium-term price developments. Climate change matters for price stability.
- JEL Code:
- E03,E31,Q51,Q54
- 8 December 2021
-
Occasional Paper Series - Issue No. 287Details
- Abstract:
- The Consumer Expectations Survey (CES) is an important new tool for analysing euro area household economic behaviour and expectations. This new survey covers a range of important topical areas including consumption and income, inflation and gross domestic product (GDP) growth, the labour market, housing market activity and house prices, and consumer finance and credit access. The CES, which was launched as a pilot in January 2020, is a mixed frequency modular survey, which is conducted online. The survey structure and centralised data collection ensures the collection of harmonised quantitative and qualitative euro area information in a timely manner that facilitates direct cross-country comparisons. During the pilot phase, it was conducted for the six largest euro area countries and contained 10,000 individual respondents. In the context of the coronavirus (COVID-19) pandemic, the CES has been used to gather useful information on the impact of the crisis on the household sector and the effectiveness of policy measures to mitigate the effects of the pandemic. The CES also collects information on the public’s overall trust in the ECB, their knowledge about its objectives and the channels through which they learn about its monetary policy and other central bank-related topics. This paper describes the key features of this new ECB survey – including its statistical properties – and offers a first evaluation of the results from the pilot phase. It also identifies a number of areas where the survey can be usefully developed further. Overall, the experience with the CES has been very positive, and the pilot survey is considered to have achieved its main objectives.
- JEL Code:
- C42,D12,D14,E21,E24,E31
- 8 December 2021
-
SpeechDetails
- Subtitle:
- Welcome remarks by Christine Lagarde, President of the ECB and Chair of the European Systemic Risk Board, at the fifth annual conference of the ESRB
- 8 December 2021
-
Research Bulletin - Issue No. 90Details
- Abstract:
- The natural rate of interest is the equilibrium real interest rate that is consistent with inflation on target andproduction at full capacity. This article argues that in economies with low natural rates, such as the euroarea today, macroprudential policy can have benefits for the effectiveness of conventional monetarypolicy, in addition to safeguarding financial stability. Notably, macroprudential policies that curb leverageof financial intermediaries during upturns can also help stimulate aggregate demand during downturns.One way they do so is by containing systemic risk in financial markets. As a by-product of the systemicrisk reduction, intermediary financing and aggregate output also become more stable. This additionalreduction in risk boosts the natural rate and thus reduces the likelihood of hitting the effective lower bound(ELB) on policy rates. In numerical simulations conducted for the euro area, the positive effect ofmacroprudential policy on the average natural rate is estimated to be around 0.7%, while the probability ofhitting the ELB declines by around 8%, relative to a benchmark scenario without macroprudential policy.
- JEL Code:
- E31,E32,E44
- Network:
- Research Task Force (RTF)
- 7 December 2021
-
Press release
- 7 December 2021
-
Weekly financial statementAnnexes
- 7 December 2021
-
Weekly financial statement - Commentary
- 7 December 2021
-
InterviewDetails
- Subtitle:
- Interview with Christine Lagarde, President of the ECB, conducted by Fabio Fazio on 28 November and published on 7 December 2021
- 7 December 2021
-
Working Paper Series - Issue No. 2625Details
- Abstract:
- This paper studies the dynamics of unemployment (u) and its natural rate (u*), with u* measured by real-time estimates for 29 countries from the OECD. We find strong evidence of hysteresis: an innovation in u causes u* to change in the same direction, and therefore has permanent effects. For our baseline specification, a one percentage point deviation of u from u* for one year has a long-run effect of 0.16 points on both variables. When we allow asymmetry, we find, perhaps surprisingly, that decreases in u have larger long-run effects than increases in u.
- JEL Code:
- E24
- 7 December 2021
-
Working Paper Series - Issue No. 2624Details
- Abstract:
- I propose a new model, conditional quantile regression (CQR), that generates density forecasts consistent with a specific view of the future evolution of some variables. This addresses a shortcoming of existing quantile regression-based models, for example the at-risk framework popularised by Adrian et al. (2019), when used in settings, such as most forecasting processes within central banks and similar institutions, that require forecasts to be conditional on a set of technical assumptions. Through an application to house price inflation in the euro area, I show that CQR provides a viable alternative to existing approaches to conditional density forecasting, notably Bayesian VARs, with considerable advantages in terms of flexibility and additional insights that do not come at the cost of forecasting performance.
- JEL Code:
- C22,C53,E37,R31
- 6 December 2021
-
Working Paper Series - Issue No. 2623Details
- Abstract:
- This paper attempts to gauge the effects of various fiscal and monetary policy rules on macroeconomic outcomes in the euro area. It consists of two major parts – a historical assessment and an assessment based on an extended scenario until 2030 – and it builds on the ECB-BASE –a semistructural model for the euro area. The historical analysis (until end-2019, `pre-pandemic´) demonstrates that a consistently countercyclical fiscal policy could have created a fiscal buffer in good economic times and it would have been able to eliminate a large portion of the second downturn in the euro area. In turn, the post-pandemic simulations until 2030 reveal that certain combinations of policy rules can be particularly powerful in reaching favourable macroeconomic outcomes (i.e. recovering pandemic output losses and bringing inflation close to the ECB target). These consist of expansionary-for-longer fiscal policy, which maintains support for longer than usually prescribed, and lower-for-longer monetary policy, which keeps the rates lower for longer than stipulated by a standard reaction function of a central bank. Moreover, we demonstrate that in the current macroeconomic situation, fiscal and monetary policies reinforce each other and mutually create space for each other. This provides a strong case for coordination of the two policies in this situation.
- JEL Code:
- E32,E62,E63
- 6 December 2021
-
Working Paper Series - Issue No. 2622Details
- Abstract:
- We introduce frictional financial intermediation into a HANK model. Households are subject to idiosyncratic and aggregate risk and smooth consumption through savings and consumer loans intermediated by banks. The banking friction introduces an endogenous countercyclical spread between the interest rate on savings and on loans. This interacts with incomplete markets because borrowers and savers face different intertemporal prices, and induces a time-varying mass point of high MPC households. Aggregate shocks through their impact on the spread give rise to consumption inequality. We show this mechanism to be empirically relevant. Ex-ante macro prudential regulation reduces welfare by reducing consumption smoothing.
- JEL Code:
- C11,D31,E32,E63
- Network:
- ECB Lamfalussy Fellowship Programme
- 6 December 2021
-
Press release
- 3 December 2021
-
Working Paper Series - Issue No. 2621Details
- Abstract:
- We assess how firm expectations about future production impact current production and pricing decisions. Our analysis is based on a large survey of firms in the German manufacturing sector. To identify the causal effect of expectations, we rely on the timing of survey responses and match firms with the same fundamentals but different views about the future. Firms that expect their production to increase (decrease) in the future are 15 percentage points more (less) likely to raise current production and prices, compared to firms that expect no change in production. In a second step, we show that expectations also matter even if they turn out to be incorrect. Lastly, we aggregate expectation errors across firms and find that they account for about 15 percent of aggregate fluctuations.
- JEL Code:
- E32,D84,E71
- 3 December 2021
-
Legal Working Paper Series - Issue No. 21Details
- Abstract:
- Given the urgent need to dramatically reduce greenhouse gas emissions, and concern regarding insufficient climate action and ambition across the globe, NGOs and individuals are increasingly turning to the courts to force States, public authorities, and private entities to increase their climate action and ambition and hold them accountable through climate-related litigation. The three contributions in this legal working paper discuss various aspects of such climate change litigation around the world. The papers examine the evolution of climate-related cases, the scope of such cases and the varying grounds on which they have been based. They also focus in some detail on certain key judgments addressing novel issues, as well as a recent climate-related case brought against a national central bank. The papers were originally presented at the Legal Colloquium on “Climate change litigation and central banks – Action for the environment”, organised by the European Central Bank on 27 May 2021.
- JEL Code:
- K32,K33,K39,K41,Q54
- 2 December 2021
- 2 December 2021
-
Working Paper Series - Issue No. 2620Details
- Abstract:
- This paper investigates how the monetary policy transmission channels change once the economy is in a low interest rate environment. We estimate a nonlinear model for the euro area and its five largest countries over the period 1999q2-2019q1 and allow for the effects of monetary policy shocks to be state dependent. Using smooth transition local projections, we examine the impulse responses of investment, savings, consumption, and the output gap to an expansionary monetary policy shock under normal and low interest rate regimes. We find evidence for a macroeconomic reversal rate related to the substitution effects becoming weaker relative to the income effects in a low interest rate regime. In this regime the effects of monetary policy shocks are either less powerful or reverse sign compared with a normal rate regime.
- JEL Code:
- E21,E22,E43,E52
- 2 December 2021
-
Working Paper Series - Issue No. 2619Details
- Abstract:
- Endogeneity of the labour market slack in reduced-form Phillips Curves (PCs) is usually addressed either by including proxies for omitted supply shocks, or by using instrumental variables. Using the Kiviet (2020) Kinky Least Squares estimator, we find evidence that supply-shock proxies should not be omitted from PCs, and that many popular instrumental variables seem to be invalid. We estimate a standard backward-looking wage Phillips Curve by Kinky Least Squares and find that unless a large negative correlation between the slack variable and the error term is assumed, the coefficient of the slack variable is significantly negative.
- JEL Code:
- C1,E3
- 2 December 2021
-
MFI interest rate statistics
- 1 December 2021
-
Working Paper Series - Issue No. 2618Details
- Abstract:
- How do banks set their target capital ratio? How do they adjust to reach it? This paper answers these questions using an original dataset of capital ratio targets directly announced to investors by European banks, materially improving data quality compared to usual estimated implicit target. It provides the following key lessons. First, targets are affected by capital requirements and a procyclical behavior consistent with market pressure. Second, banks do not distinguish between the different types of capital requirements for setting their targets, suggesting weak usability of the regulatory buffers. Third, the distance between actual CET1 ratio and the target is a valuable predictor of future balance-sheet adjustment, suggesting that banks actively drive their capital ratios toward their announced targets, through capital accumulation and portfolio rebalancing. Fourth, this adjustment occurs both above and below targets, but banks below target adjust faster, suggesting stronger pressure. These results provide important lessons for policymakers regarding the design of the prudential framework and the effectiveness of countercyclical policies.
- JEL Code:
- E51,E58,G21,G28
- 1 December 2021
-
Occasional Paper Series - Issue No. 286Details
- Abstract:
- Even before their deployment in major economies, one of the concerns that has been voiced about central bank digital currency (CBDC) is that it might be too successful and lead to bank disintermediation, which could intensify further in the case of a banking crisis. Some also argue that CBDC might crowd out private payment solutions beyond what would be desirable from the perspective of the comparative advantages of private and public sector money. This paper discusses success factors for CBDC and how to avoid the risk of crowding out. After examining ways to prevent excessive use as a store of value, the study emphasises the importance of the functional scope of CBDC for the payment functions of money. The paper also recalls the risks that use could be too low if functional scope, convenience or reachability are unattractive for users. Finding an adequate functional scope – neither too broad to crowd out private sector solutions, nor too narrow to be of limited use – is challenging in an industry with network effects, like payments. The role of the incentives offered to private sector service providers involved in distributing, using and processing CBDC (banks, wallet providers, merchants, payment processors, acquirers, etc.) is discussed, including fees and compensation.
- JEL Code:
- E3,E5,G1
- 30 November 2021
-
Weekly financial statementAnnexes
- 30 November 2021
-
Weekly financial statement - Commentary
- 30 November 2021
-
Euro area insurance corporations statisticsAnnexes
- 30 November 2021
-
Euro area insurance corporations statistics
- 30 November 2021
-
InterviewDetails
- Subtitle:
- Interview with Luis de Guindos, Vice-President of the ECB, conducted by Guillaume Benoit, Édouard Lederer and Thibaut Madelin on 24 November and published on 30 November
- 29 November 2021
-
SpeechDetails
- Subtitle:
- Lectio Magistralis by Christine Lagarde, President of the ECB, at the Accademia Nazionale dei Lincei
- 29 November 2021
-
InterviewDetails
- Subtitle:
- Interview with Isabel Schnabel, Member of the Executive Board of the ECB, conducted by Mitri Sirin on 29 November 2021
- 29 November 2021
-
SpeechDetails
- Subtitle:
- Presentation by Isabel Schnabel, Member of the Executive Board of the ECB, at a meeting organised by Bundesverband der Deutschen Industrie (BDI)
- 29 November 2021
-
Survey of Monetary Analysts
- 26 November 2021
-
InterviewDetails
- Subtitle:
- Interview with Christine Lagarde, President of the ECB, conducted by Gerald Braunberger, Dennis Kremer and Christian Siedenbiedel on 23 November and published on 26 November 2021
- 26 November 2021
-
Working Paper Series - Issue No. 2617Details
- Abstract:
- Price inflation in the euro area has been stable and low since the Global Financial Crisis, despite notable changes in output and unemployment. We show that an increasing share of high markup firms is part of the explanation of why inflation remained stubbornly stable and low in the euro area over the past two decades. For this purpose, we exploit a rich firm-level database to show that over the period 1995–2018 the aggregate markup in the euro area has been on the rise, mainly on account of a reallocation towards high-markup firms. We document significant heterogeneity in markups across sectors and countries and, by linking these markup developments to the evolution of sectoral level producer and consumer price inflation, we find that (i) inflation in high-markup sectors tends to be less volatile than in low-markup sectors and (ii) inflation in high-markup sectors responds significantly less to oil supply, global demand and euro area monetary policy shocks.
- JEL Code:
- D2,D4,N1,O3
- Network:
- Price-setting Microdata Analysis Network (PRISMA)
- 26 November 2021
-
Monetary developments in the euro areaAnnexes
- 26 November 2021
-
Monetary developments in the euro area
- 26 November 2021
-
SpeechDetails
- Subtitle:
- Keynote speech by Christine Lagarde, President of the ECB, at the ECB Legal Conference 2021
- 25 November 2021
-
Monetary policy account
- 25 November 2021
-
Working Paper Series - Issue No. 2616Details
- Abstract:
- This paper shows that newspaper articles contain timely economic signals that can materially improve nowcasts of real GDP growth for the euro area. Our text data is drawn from fifteen popular European newspapers, that collectively represent the four largest Euro area economies, and are machine translated into English. Daily sentiment metrics are created from these news articles and we assess their value for nowcasting. By comparing to competitive and rigorous benchmarks, we find that newspaper text is helpful in nowcasting GDP growth especially in the first half of the quarter when other lower-frequency soft indicators are not available. The choice of the sentiment measure matters when tracking economic shocks such as the Great Recession and the Great Lockdown. Non-linear machine learning models can help capture extreme movements in growth, but require sufficient training data in order to be effective so become more useful later in our sample.
- JEL Code:
- C43,C45,C55,C82,E37
- 25 November 2021
-
Working Paper Series - Issue No. 2615Details
- Abstract:
- To what extent can Quantitative Easing impact productivity growth? We document a strong and heterogeneous response of corporate R&D investment to changes in debt financing conditions induced by corporate debt purchases under the ECB’s Corporate Sector Purchase Program. Companies eligible for the program increase significantly their investment in R&D, relative to similar ineligible companies operating in the same country and sector. The evidence further suggests that by subsidizing the cost of debt, corporate bond purchases by the central bank stimulate innovation through a wealth transfer to innovative companies with low debt levels, rather than by supporting credit constrained firms.
- JEL Code:
- E5,G10,O3
- Network:
- Research Task Force (RTF)
- 25 November 2021
-
SpeechDetails
- Subtitle:
- Speech by Frank Elderson, Member of the Executive Board of the ECB and Vice-Chair of the Supervisory Board of the ECB, ECB Legal Conference 2021
- 25 November 2021
-
SpeechDetails
- Subtitle:
- Presentation by Isabel Schnabel, Member of the Executive Board of the ECB, at a meeting organised by Wirtschaftsrat der CDU
- 24 November 2021
-
SpeechDetails
- Subtitle:
- Presentation by Isabel Schnabel, Member of the Executive Board of the ECB, at a Youth Dialogue hosted by the University of Sofia
- 24 November 2021
-
SpeechDetails
- Subtitle:
- Speech by Fabio Panetta, Member of the Executive Board of the ECB, at Sciences Po
Annexes- 24 November 2021
-
Other publication
- 24 November 2021
-
Occasional Paper Series - Issue No. 285Details
- Abstract:
- Climate change has profound effects not only for societies and economies, but also for central banks’ ability to deliver price stability in the future. This paper starts by documenting why climate change matters for monetary policy: it impacts the economic variables relevant to setting the monetary policy stance, it interacts with fiscal and structural responses and it can generate dislocations in financial markets, which are impossible for monetary policy to ignore. Next, we survey several possible ways central banks can respond to climate change. These range from protective actions to more proactive measures aimed at mitigating climate change and supporting green finance and the transition to sustainable growth. We also discuss the constraints and trade-offs faced by central banks as they respond to climate risks. Finally, focusing on the specific challenges faced by inflation-targeting central banks, we consider how certain design features of this regime might interact with, and evolve in response to, the climate challenge.
- JEL Code:
- E52,E58,Q54
- 24 November 2021
-
Press releaseRelated
- 24 November 2021
-
Survey on the Access to Finance of Enterprises in the euro area
- 24 November 2021
-
Survey on the Access to Finance of Enterprises in the euro areaAnnexes
- 24 November 2021
-
SAFE questionnaire
Related- 24 November 2021
- 24 November 2021
-
Research Bulletin - Issue No. 89Details
- Abstract:
- The outbreak of the coronavirus (COVID-19) pandemic led to heightened uncertainty and a “dash-for-cash” in March 2020. Investors moved out of risky assets and into safe assets. The mutual fund sector in particular was hit by unprecedented investor redemptions and faced fire sale pressure as a result. Typically, banks that engage in securities trading – dealer banks – absorb such bond sales, supporting market liquidity, but regulation may limit their ability to do so by requiring them to maintain a certain leverage ratio. In recent research, we analyse the role of bank leverage constraints as an amplifier of bond market illiquidity during the March 2020 crisis. Our analysis links mutual funds bond holdings to dealer banks and their leverage constraints. We document that mutual funds that were holding more bonds exposed to dealer bank constraints in their portfolio faced bigger selling pressure in March 2020. We provide supplementary evidence that bank leverage constraints affect bond liquidity, using the introduction of leverage ratio regulation in the euro area.
- JEL Code:
- G12,G18,G21
- 23 November 2021
-
Weekly financial statementAnnexes
- 23 November 2021
-
Weekly financial statement - Commentary
- 23 November 2021
-
Euro money market statistics
- 23 November 2021
-
InterviewDetails
- Subtitle:
- Interview with Isabel Schnabel, Member of the Executive Board of the ECB, conducted by Carolynn Look and Alexander Weber on 22 and published on 23 November 2021
- 22 November 2021
-
SpeechDetails
- Subtitle:
- Remarks by Luis de Guindos, Vice-President of the ECB at the virtual ceremony awarding the 2020 Germán Bernácer Prize to Ralph Koijen
- 22 November 2021
- 22 November 2021
-
Working Paper Series - Issue No. 2614Details
- Abstract:
- We develop early warning models for financial crisis prediction by applying machine learning techniques to macrofinancial data for 17 countries over 1870–2016. Most nonlin-ear machine learning models outperform logistic regression in out-of-sample predictions and forecasting. We identify economic drivers of our machine learning models using a novel framework based on Shapley values, uncovering nonlinear relationships between the predic-tors and crisis risk. Throughout, the most important predictors are credit growth and the slope of the yield curve, both domestically and globally. A flat or inverted yield curve is of most concern when nominal interest rates are low and credit growth is high.
- JEL Code:
- C40,C53,E44,F30,G01
- 19 November 2021
-
Working Paper Series - Issue No. 2613Details
- Abstract:
- We quantify spillbacks from US monetary policy based on structural scenario analysis and minimum relative entropy methods applied in a Bayesian proxy structural vector-autoregressive model estimated on data for the time period from 1990 to 2019. We find that spillbacks account for a non-trivial share of the overall slowdown in domestic real activity in response to a contractionary US monetary policy shock. Our analysis suggests that spillbacks materialise as Tobin’s q/cash flow and stock market wealth effects impinge on US investment and consumption. Contractionary US monetary policy depresses foreign sales of US firms, which reduces their valuations/cash flows and thereby induces cutbacks in investment. Similarly, as contractionary US monetary policy depresses US and foreign equity prices, the value of US households’ portfolios is reduced, which triggers a drop in consumption. Net trade does not contribute to spillbacks because US monetary policy affects exports and imports similarly. Finally, spillbacks materialise through advanced rather than emerging market economies, consistent with their relative importance in US firms’ foreign demand and US foreign equity holdings.
- JEL Code:
- F42,E52,C50
- 19 November 2021
-
Balance of payments (monthly)
- 19 November 2021
-
SpeechDetails
- Subtitle:
- Keynote speech by Christine Lagarde, President of the ECB, at the 31st Frankfurt European Banking Congress 2021 “From Recovery to Strength”
- 19 November 2021
-
The ECB BlogDetails
- Subtitle:
- To continue playing its role as the anchor of the monetary system, central bank money will need to respond to evolving needs, says Executive Board member Fabio Panetta. This means that we must intensify the work on central bank digital currencies.
Related- 30 November 2022
-
The ECB Blog
- 13 July 2022
-
The ECB Blog
- 14 July 2021
-
The ECB Blog
- 25 March 2021
- 2 December 2020
-
The ECB Blog
- 2 October 2020
-
The ECB Blog
- 18 November 2021
-
Working Paper Series - Issue No. 2612Details
- Abstract:
- We build a novel macro-finance model that combines a semi-structural macroeconomic module with arbitrage-free yield-curve dynamics. We estimate it for the United States and the euro area using a Bayesian approach and jointly infer the real equilibrium interest rate (r*), trend inflation (π*), and term premia. Similar to Bauer and Rudebusch (2020, AER), π* and r* constitute a time-varying trend for the nominal short-term rate in our model, rendering estimated term premia more stable than standard yield curve models operating with time-invariant means. In line with the literature, our r* estimates display a distinct decline over the last four decades.
- JEL Code:
- C11,C32,E43,G12,E44,E52
- 18 November 2021
-
SpeechDetails
- Subtitle:
- Introductory remarks by Fabio Panetta, Member of the Executive Board of the ECB, at the ECON Committee of the European Parliament
- 18 November 2021
-
Euro area investment fund statisticsAnnexes
- 18 November 2021
-
Euro area investment fund statistics
- 18 November 2021
-
Euro area financial vehicle corporation statisticsAnnexes
- 18 November 2021
-
Euro area financial vehicle corporation statistics
- 17 November 2021
-
SpeechDetails
- Subtitle:
- Speech by Isabel Schnabel, Member of the Executive Board of the ECB, at a virtual event organised by Goldman Sachs
Annexes- 17 November 2021
-
Speech
- 17 November 2021
-
Press releaseRelated
- 17 November 2021
-
Financial Stability Review
- 17 November 2021
-
Financial Stability ReviewAnnexes
- 17 November 2021
Related- 17 November 2021
- 17 November 2021
-
Financial Stability Review - ArticleFinancial Stability Review Issue 2, 2021Details
- Abstract:
- Numerous European and national initiatives have been deployed since 2014 to reduce non-performing loan (NPL) stocks on euro area bank balance sheets. NPL ratios have fallen as a result, but very gradually, mainly thanks to sales to non-bank investors. Despite stronger market activity, prices paid by NPL investors have only improved marginally and continue to stand well below values assigned to NPLs by banks. One type of NPL that has proven particularly difficult to resolve is loans to non-financial firms that have borrowed from multiple banks – multi-creditor loans. Analysis of these loans relative to others finds lower provision coverage by the lending banks, reflecting more optimistic valuations by individual banks and limited recognition of the expected costs of multi-creditor coordination. This special feature proposes a strategy to overcome creditor coordination failures and costs, through the use of data platforms providing ex ante transparency to NPL investors. These, together with NPL securitisation, could substantially reduce the gap between the value of the loans booked on banks’ balance sheets and the prices offered by investors for NPL portfolios.
- JEL Code:
- G21,G32
- 17 November 2021
-
Financial Stability Review - ArticleFinancial Stability Review Issue 2, 2021Details
- Abstract:
- Bank capital buffers are supposed to help banks to absorb losses while maintaining the provision of key financial services to the real economy in times of stress. Capital buffers that are usable along these lines should lessen the damaging effects that can arise from credit supply shortages. Making use of buffers entails using the capital space above regulatory buffers and minimum requirements and, in case of need, also using regulatory buffers. This special feature analyses bank lending behaviour during the pandemic to gain insights into banks’ propensity to use capital buffers and the impact of the regulatory capital relief measures implemented by the authorities. From a macro perspective, the euro area banking system was able to meet credit demand and withstand stress. However, this aggregate view reflects several factors, including the impact of extraordinary policy measures. A micro perspective thus can help to comprehend how the capital buffer framework and capital releases affected banks’ behaviour during the pandemic. A microeconometric analysis shows that the banks with limited capital space above regulatory buffers adjusted their balance sheets by reducing lending, which could be interpreted as an attempt to defend capital ratios, suggesting unwillingness to use capital buffers. The results also show that the regulatory capital relief measures adopted during in the pandemic, which added to banks’ existing capital space, were associated with higher credit supply. while more research is desirable, this suggests that more releasable capital could enhance macroprudential authorities’ ability to act countercyclically when a crisis occurs.
- JEL Code:
- E58,G21,E52,E44,E41
- 16 November 2021
-
Weekly financial statementAnnexes
- 16 November 2021
-
Weekly financial statement - Commentary
- 15 November 2021
-
SpeechDetails
- Subtitle:
- Speech by Luis de Guindos, Vice-President of the ECB at the 24th Euro Finance Week
- 15 November 2021
-
Financial Stability Review - ArticleFinancial Stability Review Issue 2, 2021Details
- Abstract:
- This special feature reviews recent trends in the consolidation of the euro area banking sector, examines the characteristics and drivers of bank M&A transactions, and analyses the impact of bank mergers and acquisitions on the performance of euro area banks. Bank mergers and acquisitions (M&As) have been subdued in the euro area since the global financial crisis. Most M&A activity has had a domestic focus and involved smaller targets, with larger and sounder acquirers acting as consolidators. Consolidation seems on average to have had a moderately positive impact on the profitability of the banks involved, although high levels of variance reveal the presence of large execution and design risks amid low overall returns on capital in the banking sector. Improved post-transaction profitability can be linked to targets’ lower cost efficiency, liquidity and capitalisation. Cross-border M&A transactions have been concentrated within a few small groups of euro area countries, supported by prior financial links and geographical proximity. Such transactions tend to be followed by a stronger improvement in profitability than domestic mergers, although this effect has diminished since the global financial crisis.
- JEL Code:
- G21,G34,F36
- 15 November 2021
-
SpeechDetails
- Subtitle:
- Introductory statement by Christine Lagarde, President of the ECB, at the Hearing of the Committee on Economic and Monetary Affairs of the European Parliament (by videoconference)
Annexes- 15 November 2021
- 15 November 2021
-
Speech
- 12 November 2021
-
Governing Council decisions - Other decisions
- 12 November 2021
-
SpeechDetails
- Subtitle:
- Panel intervention by Philip R. Lane, Member of the Executive Board of the ECB, at the European Commission webinar on “The future of the EU fiscal governance framework”
- 12 November 2021
-
Press release
- 11 November 2021
-
SpeechDetails
- Subtitle:
- Introductory remarks by Philip R. Lane, Member of the Executive Board of the ECB, at the Second joint European Central Bank – Federal Reserve Bank of New York conference
- 11 November 2021
-
Euro area securities issues statisticsAnnexes
- 11 November 2021
-
Euro area securities issues statistics
- 11 November 2021
-
Euro area securities issues statistics
- 11 November 2021
-
Economic Bulletin
- 11 November 2021
-
Survey of Professional Forecasters
- 11 November 2021
-
Economic Bulletin - BoxEconomic Bulletin Issue 7, 2021Details
- Abstract:
- In the wake of the ECB’s new monetary policy strategy, a special survey was conducted among the panel of participants in the ECB’s Survey of Professional Forecasters (SPF). The aim of the survey was to gain an insight into how the participants in the regular SPF survey have assessed the new strategy and into whether it has already had, or will have, an impact on their forecasts. Overall, respondents considered the new strategy to be an improvement, identifying the clearer inflation target (2%) and explicit commitment to symmetry as key elements. Regarding the impact on macroeconomic forecasts, around one-third of respondents indicated that they had revised their point longer-term inflation expectations, and a slightly larger portion indicated that they had revised (up) the balance of risks surrounding those expectations in response to the new strategy. The results of the survey suggest there is a strong correlation between what respondents viewed as key aspects in the new strategy and what they viewed as key improvements compared with the previous strategy.
- JEL Code:
- E37,E52,E58,D84
- 11 November 2021
-
Economic Bulletin - BoxEconomic Bulletin Issue 7, 2021Details
- Abstract:
- Shocks to inflation can have longer-lasting effects in the presence of second-round effects. Wage-setting systems are more likely to trigger second-round effects if wage indexation is widespread in labour agreements. To derive a euro area indicator for the prevalence of wage indexation, characteristics of national wage indexation schemes are weighted by country shares in euro area private sector employment. Based on this indicator, around 3% of private sector employees in the euro area have wages and minimum wages automatically indexed to inflation. For most of the employees covered by automatic wage indexation, the inflation measure is backward-looking and includes energy. Indexation regimes where inflation has a formal, but not automatic role in wage negotiations, apply to currently around 18% of employees in the euro area and mostly consider forward-looking inflation measures excluding energy. Additionally, around 18% of euro area employees work in countries where only the minimum wages are automatically indexed to inflation. These indexation mechanisms are usually backward-looking with inflation measures that include energy. For more than half of the employees in the euro area, inflation does not play a formal role in wage setting but can be an important factor in wage negotiations. Where there is no formal role for inflation, inflation developments can be more easily disregarded in times of high uncertainty, with the focus being on job security instead, for example. Since the Great Financial Crisis, indexation regimes with a formal role for inflation in wage setting have become somewhat less prevalent in the euro area. Overall, the likelihood of euro area wage-setting schemes triggering second-round effects based on inflation indexation is relatively limited, particularly with regard to energy inflation. Recent hikes in energy inflation can be expected to lead to some automatic wage increases, mainly in minimum wages in some countries, affecting only a small share of private sector employees. However, a broadly based and automatic pass-through to wage growth through wage indexation mechanisms seems rather unlikely.
- JEL Code:
- J3,J30,J38,E31
- 11 November 2021
-
Economic Bulletin - BoxEconomic Bulletin Issue 7, 2021Details
- Abstract:
- This box assesses labour supply developments during the COVID-19 pandemic. During the pandemic labour supply has fallen sharply. It has partially recovered, although it remains substantially below pre-pandemic levels. While labour force was initially affected in a similar way across the largest euro area countries, there was also some heterogeneity across countries and demographic groups. When taking the pre-pandemic trends into account, workers with a low and medium level of education as well as older workers explain the largest part of the current gap to the pre-pandemic trends. A full recovery of labour force participation to the rising pre-pandemic trend will likely be gradual.
- JEL Code:
- E32,J11,J21
- 11 November 2021
-
Economic Bulletin - ArticleEconomic Bulletin Issue 7, 2021Details
- Abstract:
- This article reviews three popular equilibrium exchange rate models, the purchasing power parity (PPP), behavioural equilibrium exchange rate (BEER) and macroeconomic balance (MB) models. The aim is to address two questions: whether such models help in forecasting real and nominal exchange rates and which macroeconomic fundamentals contain such predictive power. The evidence suggests that real exchange rates adjust over time to their estimated real exchange rate equilibria only in the cases of the PPP and BEER models. Exploring this empirical regularity, it is possible to draw three important lessons. The first is that such equilibrium adjustment helps to forecast real exchange rates. The second lesson is that this real equilibrium adjustment process helps in forecasting nominal exchange rates, as most of the adjustment toward equilibrium is achieved by currency movements and not by relative price changes. The third is that most of the forecasting power comes from the exploitation of the mean-reverting properties of real exchange rates rather than an understanding of the relationship between exchange rates and economic fundamentals.
- JEL Code:
- C33,F31,F37,F41
- 10 November 2021
-
Economic Bulletin - BoxEconomic Bulletin Issue 7, 2021Details
- Abstract:
- The growth of euro area labour productivity, measured by real GDP per hour worked, increased at the onset of the coronavirus (COVID-19) pandemic before declining during the subsequent economic recovery. This contradicts the general notion of productivity being procyclical and reflects the unique nature of this crisis. This box discusses the recent patterns in labour productivity and considers the extent to which some of these developments might fade or consolidate after the crisis.
- JEL Code:
- D22,D24,D61,O33,O47,O52
- 10 November 2021
-
Economic Bulletin - BoxEconomic Bulletin Issue 7, 2021Details
- Abstract:
- This box reviews recent data for evidence of scarring effects stemming from the coronavirus (COVID-19) shock on the global economy (excluding the euro area). Taking a production function approach perspective, it analyses recent data relevant for determining the evolution of potential output and compares them with developments in the aftermath of the Great Recession. The stylised facts suggest that the level of global potential output has declined during the pandemic, albeit less than during the Great Recession. This decline can mostly be attributed to temporary factors, although more lasting damage may occur if people remain out of work for longer, loose their skills or become long-term unemployed.
- JEL Code:
- E22,E23,E24
- 10 November 2021
-
Economic Bulletin - ArticleEconomic Bulletin Issue 7, 2021Details
- Abstract:
- Productivity plays a key role in the economic resilience and social welfare of countries. Central bankers are also interested in higher productivity growth because it would contribute to increasing the natural rate of interest and, therefore, the effectiveness of monetary policy, its room for manoeuvre and its transmission to the economy. With this monetary policy perspective in mind, this article aims to show key productivity trends and drivers over the past few decades in the euro area. The article is complemented by Box 4 in this issue of the Economic Bulletin, which presents preliminary evidence on the impact of the coronavirus (COVID-19) pandemic, and of policy responses to it, on productivity in the euro area.
- JEL Code:
- D22,D24,D61,O33,O47,O52
- 10 November 2021
-
Digital Euro Investigation Phase documentAnnexes
- 10 November 2021
-
Digital Euro Investigation Phase document
- 10 November 2021
-
Digital Euro Investigation Phase document
- 10 November 2021
-
Digital Euro Investigation Phase document
- 10 November 2021
-
Digital Euro Investigation Phase document
- 9 November 2021
-
SpeechDetails
- Subtitle:
- Speech by Isabel Schnabel, Member of the Executive Board of the ECB, at a virtual conference on “Diversity and Inclusion in Economics, Finance, and Central Banking”
Annexes- 9 November 2021
-
Speech
- 9 November 2021
-
Weekly financial statementAnnexes
- 9 November 2021
-
Weekly financial statement - Commentary
- 9 November 2021
-
SpeechDetails
- Subtitle:
- Remarks by Christine Lagarde, President of the ECB, at the ECB Forum on Banking Supervision, 9 November 2021
- 9 November 2021
-
Economic Bulletin - BoxEconomic Bulletin Issue 7, 2021Details
- Abstract:
- This box looks at recent trends in, and the outlook for, euro area housing markets using data from the ECB’s new Consumer Expectations Survey. Households from the highest income quintile, those expecting high income growth and households that are net savers are particularly likely to support housing demand going forward. While some accumulated savings may have already been used for house purchase, such savings are still expected to support housing demand in the near term. Households expect favourable credit conditions and increasing housing prices, which suggests a dynamic housing market but may also pose housing affordability problems for lower-income households.
- JEL Code:
- R2,R3
- 9 November 2021
-
Economic Bulletin - ArticleEconomic Bulletin Issue 7, 2021Details
- Abstract:
- This article reviews the developments in the euro area housing market during the various phases of the coronavirus (COVID-19) pandemic and compares them with previous crises. During the first wave of the COVID-19 pandemic, the introduction of mandatory and voluntary restrictions on economic agents’ mobility had a strong impact on housing market activity. However, in contrast to the global financial crisis and the sovereign debt crisis, the upward trend in house prices and housing loans continued unabated, which was also thanks to resilient demand for housing by households. During the second and third waves, the forceful support of monetary, fiscal and macroprudential policy measures amid more targeted containment measures ensured favourable financing conditions and helped increase the attractiveness of housing for investment purposes, while supply-side bottlenecks may have exerted some upward pressure on house prices. The outlook for the euro area housing market remains dependent on uncertainties related to pandemic developments, policy support and structural changes.
- JEL Code:
- E22,E31,E32,R31
- 9 November 2021
-
SpeechDetails
- Subtitle:
- Presentation by Fabio Panetta, Member of the Executive Board of the ECB, at the high-level panel on central bank digital currency, 30th Anniversary Conference of the Bank of Finland Institute for Emerging Economies (BOFIT)
- 8 November 2021
-
SpeechDetails
- Subtitle:
- Welcome address by Philip R. Lane, Member of the Executive Board of the ECB, at the ECB Conference on Money Markets
- 8 November 2021
-
Economic Bulletin - BoxEconomic Bulletin Issue 7, 2021Details
- Abstract:
- This box assesses the recent dynamics and outlook for economic activity in more contact-intensive services in the euro area, which were particularly adversely affected by the pandemic. Following the marked deterioration during the initial phase of the COVID-19 pandemic, value added in those services rebounded strongly in the second and third quarters of 2021, while remaining well below its pre-pandemic level. The ample slack in these subsectors is also confirmed by the significant role of demand as a factor limiting activity, which in turn appears to be affected by pandemic restrictions. The gradual resolution of the public health crisis and the ensuing reopening of the economy are expected to support a continued recovery in more contact-intensive services. In the medium term, structural factors, such as changes in households’ preferences and working arrangements, will also play a role in shaping the recovery path of consumer services.
- JEL Code:
- E22,E32
- 8 November 2021
-
InterviewDetails
- Subtitle:
- Interview with Philip R. Lane, Member of the Executive Board of the ECB, conducted by Lluís Pellícer on 3 November 2021
- 5 November 2021
-
Survey of Monetary Analysts - Aggregate results
- 5 November 2021
-
SpeechDetails
- Subtitle:
- Speech by Fabio Panetta, Member of the Executive Board of the ECB, at the Elcano Royal Institute, Madrid
- 4 November 2021
- 4 November 2021
-
SpeechDetails
- Subtitle:
- Panel contribution by Frank Elderson, Chair of the Network of Central Banks and Supervisors for Greening the Financial System, Member of the Executive Board of the ECB and Vice-Chair of the Supervisory Board of the ECB, at COP26 World Leaders’ Summit Presidency Event on “Action on Forest and Land Use”
- 4 November 2021
-
The ECB BlogDetails
- Subtitle:
- The COP26 summit is a vital opportunity to set out a clear path towards a zero-carbon world, President Lagarde writes in a blog post. While the road ahead may seem daunting, she argues that a credible transition path will need clear signposts to break it up into more manageable stages.
- 3 November 2021
-
InterviewDetails
- Subtitle:
- Interview with Frank Elderson, Member of the Executive Board of the ECB and Vice-Chair of the Supervisory Board of the ECB, conducted by Francine Lacqua, Bloomberg TV, on 2 November
- 3 November 2021
-
Other publication
- 3 November 2021
-
SpeechDetails
- Subtitle:
- Keynote speech by Frank Elderson, Chair of the Network of Central Banks and Supervisors for Greening the Financial System, Member of the Executive Board of the ECB and Vice-Chair of the Supervisory Board of the ECB, at the COP26 Finance Day Presidency Event on “A Financial System for Net Zero”
- 3 November 2021
-
SpeechDetails
- Subtitle:
- Speech by Christine Lagarde, President of the ECB, on the occasion of the 175th anniversary of Banco de Portugal in Lisbon
- 3 November 2021
-
MFI interest rate statistics
- 2 November 2021
-
Weekly financial statementAnnexes
- 2 November 2021
-
Weekly financial statement - Commentary
- 2 November 2021
- 2 November 2021
-
€STR Transparency on errors
- 29 October 2021
- 29 October 2021
-
Card fraud report - Issue No. 2021
- 29 October 2021
-
Governing Council decisions - Other decisions
- 29 October 2021
-
Press release
- 29 October 2021
-
Survey on credit terms and conditions in euro-denominated securities financing and OTC derivatives marketsAnnexes
- 29 October 2021
- 29 October 2021
-
Other publication
- 29 October 2021
-
Press releaseRelated
- 29 October 2021
-
Euro area economic and financial developments by institutional sector (full)
- 29 October 2021
-
Press releaseRelated
- 29 October 2021
-
Survey of Professional Forecasters
- 29 October 2021
-
Survey of Professional ForecastersAnnexes
- 29 October 2021
Related- 29 October 2021
- 29 October 2021
-
Economic Bulletin - BoxEconomic Bulletin Issue 7, 2021Details
- Abstract:
- This box summarises the main findings from contacts between ECB staff and representatives of 68 leading non-financial companies operating in the euro area. The exchanges mainly took place between 4 and 13 October 2021. According to these contacts, overall activity was strong or growing across a range of sectors. However, supply constraints were increasingly limiting firms’ ability to meet demand and were generating pipeline price pressures which, while transitory in nature, were turning out to be more persistent than some had anticipated. There were also more widespread reports of labour shortages, not least as the recovery of high-contact services had stimulated recruitment activity. Owing to the pipeline prices pressures and the recent surge in energy prices, contacts anticipated greater pass-through to consumer prices and higher wages in 2022 than they had a few months ago.
- JEL Code:
- E2,E3,L2
- 28 October 2021
-
Monetary policy statementDetails
- Subtitle:
- Christine Lagarde, President of the ECB,
Luis de Guindos, Vice-President of the ECB
- 28 October 2021
-
Monetary policy decision
- 27 October 2021
-
Monetary developments in the euro areaAnnexes
- 27 October 2021
-
Monetary developments in the euro area
- 26 October 2021
-
Weekly financial statementAnnexes
- 26 October 2021
-
Weekly financial statement - Commentary
- 26 October 2021
-
Euro area bank lending survey - Issue No. 2021Annexes
- 26 October 2021
-
Euro area bank lending survey - Annex
Related- 26 October 2021
-
Press release
- 26 October 2021
-
Press releaseRelated
- 26 October 2021
-
Euro area bank lending survey - Issue No. 2021
- 25 October 2021
- 20 October 2021
- 20 October 2021
-
Balance of payments (monthly)
- 20 October 2021
-
SpeechDetails
- Subtitle:
- Keynote speech by Frank Elderson, Member of the Executive Board of the ECB and Vice-Chair of the Supervisory Board of the ECB, at the Financial Market Authority’s Supervisory Conference
- 19 October 2021
-
Weekly financial statementAnnexes
- 19 October 2021
-
Weekly financial statement - Commentary
- 19 October 2021
-
SpeechDetails
- Subtitle:
- Speech by Fabio Panetta, Member of the Executive Board of the ECB, at the ECB-CEBRA conference on international aspects of digital currencies and fintech
- 19 October 2021
-
SpeechDetails
- Subtitle:
- Keynote speech by Frank Elderson, Member of the Executive Board of the ECB and Vice-Chair of the Supervisory Board of the ECB, at the 31st Lisbon meeting between the central banks of Portuguese-speaking countries
- 19 October 2021
-
Macroprudential Bulletin - Focus - Issue No. 15Details
- Abstract:
- Green capital markets are growing rapidly while being more resilient and integrated than traditional markets. Enhancing market structures and standards will help decrease greenwashing risk and foster further growth in green finance and the transition towards carbon neutrality.
- JEL Code:
- G11,G21,G23,G28,Q54,Q56
- 19 October 2021
-
Macroprudential Bulletin - Focus - Issue No. 15Details
- Abstract:
- By means of a theoretical model, this analysis finds that without policy intervention, transition risk generates excessive risk-taking by banks. This finding provides a theoretical justification for the introduction of climate prudential policies to address transition risks.
- JEL Code:
- Q54,G28,G21
- 19 October 2021
-
Macroprudential Bulletin - Focus - Issue No. 15Details
- Abstract:
- The publication introduces a stress test approach which recognises that banks adjust to scenario adversity and that climate-related risks ingrained in long-term climate-related scenarios add to other deep-seated cyclical and structural risks in economic systems. This macroprudential approach quantifies the impact of climate-oriented scenarios on the banking system by looking at both the expected long-term growth trajectories and the cumulation of risks in lower tails of growth distribution.
- JEL Code:
- E17,E44,C53,Q54
- 19 October 2021
-
Macroprudential Bulletin - Article - Issue No. 15Details
- Abstract:
- This article estimates the “greenness” of euro area investors and the impact that the EU taxonomy could have on the markets by redirecting financial resources towards sustainable economic activities and by contributing to fill the investment gap in the relevant sectors.
- JEL Code:
- G2,G3,Q54
- 19 October 2021
-
Macroprudential Bulletin - Article - Issue No. 15Details
- Abstract:
- This article analysis the challenges of incorporating climate risks and their unique features in the existing prudential framework and explores potential avenues for addressing gaps identified in the banking framework.
- JEL Code:
- Q54,G28,G21
- 18 October 2021
-
Working Paper Series - Issue No. 2611Details
- Abstract:
- This paper provides a comprehensive analysis of the interest rate pass-through of euro area monetary policy to retail rates outside the euro area, contributing to the literature on the consequences of unofficial financial euroisation and on the transmission channels of monetary policy spillovers. The results suggest that in the long run, more than one third of all euro retail rates in euroised countries of central, eastern and south-eastern Europe (CESEE) are linked to the euro area shadow rate. Compared to euro area monetary policy, the share of cointegration of the domestic monetary policy rate is lower, suggesting that domestic central banks in euroised countries with independent monetary policy can only partially control the `euro part´ of the interest rate channel. Furthermore, euro area monetary policy shocks are fast and persistently transmitted into euro retail rates outside the euro area, which constitutes an additional channel of international shock transmission.
- JEL Code:
- C22,C32,E43,E52,F42
- 16 October 2021
-
SpeechDetails
- Subtitle:
- 2021 Per Jacobsson Lecture by Christine Lagarde, President of the ECB, at the IMF Annual Meetings
- 15 October 2021
-
Working Paper Series - Issue No. 2610Details
- Abstract:
- We analyse the elasticity of the household consumption expenditure (HCE) deflator to the exchange rate, using world input-output tables (WIOT) from 1995 to 2019. In line with the existing literature, we find a modest output-weighted elasticity of around 0.1. This elasticity is stable over time but heterogeneous across countries, ranging from 0.05 to 0.22. Such heterogeneity mainly reflects differences in foreign product content of consumption and intermediate products. Direct effects through imported consumption and intermediate products entering domestic production explain most of the transmission of an exchange rate appreciation to domestic prices. By contrast, indirect effects linked to participation in global value chains play a limited role. Our results are robust to using four different WIOT datasets. As WIOT are data-demanding and available with a lag of several years, we extrapolate a reliable estimate of the HCE deflator elasticity from 2015 onwards using trade data and GDP statistics.
- JEL Code:
- C67,E31,F42,F62
- 15 October 2021
-
Working Paper Series - Issue No. 2609Details
- Abstract:
- This paper proposes an econometric framework for nowcasting the monetary policy stance and decisions of the European Central Bank (ECB) exploiting the ow of conventional and textual data that become available between two consecutive press conferences. Decompositions of the updated nowcasts into variables' marginal contribution are also provided to shed light on the main drivers of the ECB's reaction function at every point in time. In out-of-sample nowcasting experiments, the model provides an accurate tracking of the ECB monetary policy stance and decisions. The inclusion of textual variables contributes significantly to the gradual improvement of the model performance.
- JEL Code:
- E37,E47,E52
- 14 October 2021
-
SpeechDetails
- Subtitle:
- Statement by Christine Lagarde, President of the ECB, at the forty-fourth meeting of the International Monetary and Financial Committee
- 14 October 2021
-
Working Paper Series - Issue No. 2608Details
- Abstract:
- The macroeconomic effects of climate-related events and climate policies depend on the interaction between demand- and supply-type of shocks that those events and policies imply. Using a panel of 24 OECD countries for the sample 1990-2019 and a standard macroeconomic framework, the paper tests the combined effect of (1) climate change, (2) environmental policies and (3) environment-related technologies on the macroeconomy. Results show that climate change and policies to counteract them have a significant, albeit not sizeable, macroeconomic effects over the business cycle. We find evidence that physical risks work as negative demand shocks while transition policies or technology improvements resemble downward supply movements. Furthermore, the disruptive effects on the economy are exacerbated for countries without carbon tax or with a high exposure to natural disasters. Overall our results support the need for a uniform policy mix to counteract climate change with a balance between demand-pull and technology-push policies.
- JEL Code:
- C11,C33,E32,E58,Q5
- 14 October 2021
-
Working Paper Series - Issue No. 2607Details
- Abstract:
- We provide evidence that the strength of the bank lending channel varies considerably across three major events in the European sovereign debt crisis - the Greek debt restructuring (PSI), outright monetary transactions (OMT), and quantitative easing (QE). We study how lending responds to each shock using detailed bank, firm, and household data from Portugal, a country that was directly exposed to the three events. While the price of sovereign debt securities increased in all three events, banks reduced sovereign debt holdings and realized accumulated capital gains only after QE. As a result, lending to final borrowers reacted more strongly to QE than to the PSI or OMT events. Our results suggest that asset purchases were more effective than signalling events at stimulating the bank lending channel.
- JEL Code:
- E52,E58,G18,G21
- Network:
- ECB Lamfalussy Fellowship Programme
- 14 October 2021
- 14 October 2021
-
Research Bulletin - Issue No. 88Details
- Abstract:
- Policy rates in advanced economies are unusually low. What effect does this have on bank stability? I identify two competing effects. On the one hand, low rates harm bank profits by squeezing interest margins. On the other hand, they boost the value of long-term assets held by banks. Using a standard banking model, I determine the policy rate level at which these two forces cancel each other out, i.e. the tipping point. Past this tipping point, the net effect of low rates on bank capital is negative. Applying the model to the US economy, I quantify the tipping point in August 2007 as a policy rate of 0.55%.
- JEL Code:
- E43,E50,G21
- Network:
- Research Task Force (RTF)
- 13 October 2021
-
Working Paper Series - Issue No. 2606Details
- Abstract:
- We estimate a FAVAR with Bayesian techniques in order to investigate the impact of loan supply conditions on euro area corporate investment and its financing structure. We identify shocks to overall demand and loan supply with sign and impact restrictions. Although tightened financial conditions have adversely impacted corporate investment during and after the sovereign debt crisis, the resulting impediments in loan supply, illustrated by lower loan volumes and higher spreads, have been partly alleviated by strengthened corporate debt issuance. We show that (1) part of the protracted increase in debt to loan ratio since the crisis reflects bottlenecks in the provision of bank credit and (2) the tightened loan supply has been more adverse for small corporations with limited market access. Overall, our analysis of macro-financial developments suggests the need for policy actions to deepen the European corporate debt market and enhance market access for smaller corporates.
- JEL Code:
- E22,E66,G21
- 13 October 2021
-
Occasional Paper Series - Issue No. 284Details
- Abstract:
- The in-house credit assessment systems (ICASs) developed by euro area national central banks (NCBs) are an important source of credit risk assessment within the Eurosystem collateral framework. They allow counterparties to mobilise as collateral the loans (credit claims) granted to non-financial corporations (NFCs). In this way, ICASs increase the usability of non-marketable credit claims that are normally not accepted as collateral in private market repo transactions, especially for small and medium-sized banks that lend primarily to small and medium-sized enterprises (SMEs). This ultimately leads not only to a widened collateral base and an improved transmission mechanism of monetary policy, but also to a lower reliance on external sources of credit risk assessment such as rating agencies. The importance of ICASs is exemplified by the collateral easing measures adopted in April 2020 in response to the coronavirus (COVID-19) crisis. The measures supported the greater use of credit claim collateral and, indirectly, increased the prevalence of ICASs as a source of collateral assessment. This paper analyses in detail the role of ICASs in the context of the Eurosystem’s credit operations, describing the relevant Eurosystem guidelines and requirements in terms of, among other factors, the estimation of default probabilities, the role of statistical models versus expert analysis, input data, validation analysis and performance monitoring. It then presents the main features of each of the ICASs currently accepted by the Eurosystem as credit assessment systems, highlighting similarities and differences.
- JEL Code:
- E58
- 12 October 2021
-
SpeechDetails
- Subtitle:
- Speech by Christine Lagarde, President of the ECB, at the Finance at Countdown event
- 12 October 2021
-
Weekly financial statementAnnexes
- 12 October 2021
-
Weekly financial statement - Commentary
- 12 October 2021
-
Working Paper Series - Issue No. 2605Details
- Abstract:
- We examine the transmission of monetary policy via the euro area investment fund sector using a Bayesian vector autoregressions framework. We find that expansionary shocks are associated with net inflows and that these are strongest for riskier fund types, reflecting search for yield among euro area investors. Search for yield behaviour by fund managers is also evident, as they shift away from low yielding cash assets following an expansionary shock. While higher risk-taking is an intended consequence of expansionary monetary policy, this dynamic may give rise to a build-up in liquidity risk over time, leaving the fund sector less resilient to large outflows in the face of a crisis.
- JEL Code:
- E52,G11,G23
- 12 October 2021
-
Occasional Paper Series - Issue No. 283Details
- Abstract:
- The consensus back in 2008 – ten years after the introduction of the euro – was that the adoption of a common currency had made a limited impact of around 2% in total on the trade flows of the first wave of euro area countries (Baldwin et al., 2008). Since then, six more countries have joined the euro area, and firms have internationalised their production processes. These two phenomena are interrelated and may have changed the way the common currency affects the euro area economy. Therefore, with the common currency now into its third decade – and with more countries queuing to adopt it – this paper revisits the trade effects of the euro, focusing on the newer euro adopters (i.e. those countries that have adopted the euro since 2007) and their interaction with the first wave of euro area members via supply chains. The contribution of the paper is twofold. First, it revisits the estimated aggregate impact of the euro on euro area trade, as well as on trade within and between the two waves of adopters. Data on bilateral flows between 1990 and 2015 for an extended sample of countries to estimate a gravity equation indicate a significant trade impact, ranging between 4.3% and 6.3% in total on average, with the magnitude being the highest for exports from the second wave of adopters to the first wave of adopters. If a synthetic control approach (Abadie and Gardeazabal, 2003; Abadie et al., 2010) is used instead, the estimated gains associated with euro adoption are greater. In particular, exports of both intermediate and final products from countries belonging to the first wave of euro adopters to those belonging to the second wave are estimated to have increased by about 30% using this approach. The second contribution made by this paper relates to the channels through which trade might be affected by a currency union. This question is explored by looking separately at trade in intermediate goods and final products. While we find that trade gains were mainly driven by trade in intermediate goods among countries that adopted the currency earlier (5.3%), our results also show that the euro had a positive effect on the exports of final products from the second wave of adopters to other euro area countries. This effect is as high as 10.6% with the gravity model and 32% with the synthetic control approach. One of the reasons for the difference in the range of estimates between the two approaches might be that the gravity model can control for unobserved characteristics via fixed effects, while the synthetic control approach may fail to do so. These results suggest that the euro facilitated the establishment and expansion of international production chains in Europe. In turn, this is likely to have increased business cycle synchronisation in the euro area and to have supported market access for later adopters.
- JEL Code:
- F14,F15
- 12 October 2021
-
Euro area securities issues statisticsAnnexes
- 12 October 2021
-
Euro area securities issues statistics
- 12 October 2021
-
Euro area securities issues statistics
- 11 October 2021
-
SpeechDetails
- Subtitle:
- Welcome address by Philip R. Lane, Member of the Executive Board of the ECB, at the ECB Conference on Monetary Policy: bridging science and practice
- 11 October 2021
-
Working Paper Series - Issue No. 2604Details
- Abstract:
- Those of professional forecasters do. For a wide range of time series models for the euro area and its member states we find a higher average forecast accuracy of models that incorporate information on inflation expectations from the ECB’s SPF and Consensus Economics compared to their counterparts that do not. The gains in forecast accuracy from incorporating inflation expectations are typically not large but statistically significant in some periods. Both short- and long-term expectations provide useful information. The professional forecasters expectations seem to help to correct the upward forecast bias in the low inflation period and to make the model forecasts more robust, in particular in the environment of high volatility. By contrast, incorporating expectations derived from financial market prices or those of firms and households does not lead to systematic improvements in forecast performance. The analysis is undertaken for headline inflation and inflation excluding energy and food and both point and density forecast are evaluated using real-time data vintages over 2001-2022.
- JEL Code:
- C53,E31,E37
- 11 October 2021
-
Working Paper Series - Issue No. 2603Details
- Abstract:
- This paper analyses the effects of the COVID-19 pandemic shock on small open economies in a monetary union with an application to the euro area. Accounting for a high degree of openness and a strong dependence on intra and extra union trade, we focus on the size and the direction of international spillovers - both from the shock itself and from the ensuing fiscal response. To do so, we use a unified modelling framework: The Euro Area and the Global Economy (EAGLE) model. Furthermore, within this general framework, we assess the extent to which specific modelling features shape the dynamic responses to the COVID-19 pandemic. The main messages are as follows. First, fiscal spillovers from the rest of the monetary union do matter. Second, the effective lower bound amplifies the size of the spillovers. Third, the design of wage negotiations leads to wage subsidies having negative international fiscal policy spillovers. Fourth, import content of government spending interacts with the effective lower bound, strongly affecting the size and sign of spillovers. Fifth, when households have finite lifetimes, the responses of output and inflation are amplified compared to the case with infinitely lived households. Finally, a next generation EU instrument is more effective when financed using a tax on consumption.
- JEL Code:
- C53,E32,E52,F45
- 11 October 2021
-
Survey of Monetary Analysts
- 8 October 2021
-
SpeechDetails
- Subtitle:
- Speech by Fabio Panetta, Member of the Executive Board of the ECB, at the panel on “Cross-border dimensions of non-bank financial intermediation: what are the priorities for building resilience globally?”, as part of the UK G7 Presidency Conference on “Safe Openness in Global Trade and Finance” hosted by the Bank of England
- 8 October 2021
-
Working Paper Series - Issue No. 2602Details
- Abstract:
- We quantify the effects of wage bargaining shocks on macroeconomic aggregates using a structural vector auto-regression model for Germany. We identify exogenous variation in bargaining power from episodes of minimum wage introduction and industrial disputes. This narrative information disciplines the impulse responses to a wage bargaining shock of un-employment and output, and sharpens inference on the behaviour of other variables. The implied transmission mechanism is in line with the theoretical predictions of a large class of search and matching models. We also find that wage bargaining shocks explain a sizeable share of aggregate fluctuations in unemployment and inflation, that their pass-through to prices is very close to being full, and that they imply plausible dynamics for the vacancy rate, firms’ profits, and the labour share.
- JEL Code:
- J2,J3,E32,C32
- 8 October 2021
-
Working Paper Series - Issue No. 2601Details
- Abstract:
- We introduce a Bayesian Mixed-Frequency VAR model for the aggregate euro area labour market that features a structural identification via sign restrictions. The purpose of this paper is twofold: we aim at (i) providing reliable and timely forecasts of key labour market variables and (ii) enhancing the economic interpretation of the main movements in the labour market. We find satisfactory results in terms of forecasting, especially when looking at quarterly variables, such as employment growth and the job finding rate. Furthermore, we look into the shocks that drove the labour market and macroeconomic dynamics from 2002 to early 2020, with a first insight also on the COVID-19 recession. While domestic and foreign demand shocks were the main drivers during the Global Financial Crisis, aggregate supply conditions and labour supply factors reflecting the degree of lockdown-related restrictions have been important drivers of key labour market variables during the pandemic.
- JEL Code:
- J6,C53,C32,C11
- 7 October 2021
-
SpeechDetails
- Subtitle:
- Presentation by Philip R. Lane, Member of the Executive Board of the ECB, at the Central Bank of Ireland webinar "The importance of data"
- 7 October 2021
-
SpeechDetails
- Subtitle:
- Welcome address by Isabel Schnabel, Member of the Executive Board of the ECB, at the ECB and Federal Reserve Bank of Cleveland’s “Inflation: Drivers and Dynamics Conference 2021”
Annexes- 7 October 2021
-
Speech
- 7 October 2021
-
Monetary policy account
- 7 October 2021
-
Working Paper Series - Issue No. 2600Details
- Abstract:
- This paper develops a Bayesian quantile regression model with time-varying parameters (TVPs) for forecasting inflation risks. The proposed parametric methodology bridges the empirically established benefits of TVP regressions for forecasting inflation with the ability of quantile regression to model flexibly the whole distribution of inflation. In order to make our approach accessible and empirically relevant for forecasting, we derive an efficient Gibbs sampler by transforming the state-space form of the TVP quantile regression into an equivalent high-dimensional regression form. An application of this methodology points to a good forecasting performance of quantile regressions with TVPs augmented with specific credit and money-based indicators for the prediction of the conditional distribution of inflation in the euro area, both in the short and longer run, and specifically for tail risks.
- JEL Code:
- C11,C22,C52,C53,C55,E31,E37,E51
- 7 October 2021
-
Working Paper Series - Issue No. 2599Details
- Abstract:
- Prospective economic developments depend on the behavior of consumer spending. A key question is whether private expenditures recover once social distancing restrictions are lifted or whether the COVID-19 crisis has a sustained impact on consumer confidence, p references, and, hence, spending. The elongated and profound experience of the COVID-19 crisis may durably affect consumer preferences. We conducted a representative consumer survey in five European countries in summer 2020, after the release of the first wave’s lockdown restrictions, and document the underlying reasons for households’ reduction in consumption in five key sectors: tourism, hospitality, services, retail, and public transports. We identify a large confidence shock in the Southern European countries and a shift in consumer preferences in the Northern European countries, particularly among high-income earners. We conclude that the COVID-19 experience has altered consumer behavior and that long-term sectoral consumption shifts may occur.
- JEL Code:
- D12,D81,D84,E21,E60,E71,G51,H30
- 6 October 2021
-
Weekly financial statementAnnexes
- 6 October 2021
-
Weekly financial statement - Commentary
- 6 October 2021
-
Working Paper Series - Issue No. 2598Details
- Abstract:
- We study the transmission of (unconventional) monetary policy to the real sector when firm decisions depend on both current and future credit market conditions. For a given level of current credit access, investment and employment increases more at firms expecting bank credit to improve in the future. Three separate unconventional policies by the ECB—the OMT, the introduction of negative rates, and the CSPP—improved expectations of future credit access for SMEs borrowing from banks that were expected to increase SME lending due to the policy. Our results enhance our understanding of the bank balance sheet channel of monetary policy.
- JEL Code:
- D22,D84,E58,G21,H63
- Network:
- Research Task Force (RTF)
- 6 October 2021
-
Working Paper Series - Issue No. 2597Details
- Abstract:
- This paper analyses the incidence and severity of sudden stops in euro area countries before and after the introduction of the ECB’s asset purchase programmes. We define sudden stops as abrupt declines in private net financial inflows, i.e. total flows adjusted for EU and IMF loans and changes in TARGET2 balances. Distinguishing between mild and severe sudden stops, we document that sudden stops were overall more frequent and more severe in euro area countries compared to other OECD economies over the period 1999–2020. On the basis of a multinomial logit model, we find that the susceptibility of euro area countries to severe sudden stops mainly reflects domestic fundamentals whereas there is no clear evidence of an adverse direct effect of being part of the euro area. On the contrary, TARGET2 appears to act as an “automatic stabiliser”, counteracting sudden stops in private financial i nflows. Moreover, our econometric analysis suggests that the asset purchase programmes implemented by the ECB since 2015 have overall almost halved the risk of severe sudden stops in euro area countries. We find tentative evidence that this effect operates through confidence channels.
- JEL Code:
- F21,F31,F32,F41,F45
- 5 October 2021
-
SpeechDetails
- Subtitle:
- Speech by Christine Lagarde, President of the ECB, at Wirtschaftsinitiative FrankfurtRheinMain e.V.
- 5 October 2021
-
Working Paper Series - Issue No. 2596Details
- Abstract:
- We propose a theoretical framework to reconcile episodes of V-shaped and L-shaped recovery, encompassing the behaviour of the U.S. economy before and after the Great Recession. In a DSGE model with endogenous growth, negative demand shocks destroy productive capacity, moving GDP to a lower trajectory. A Taylor rule policy designed to reduce the output gap may counterbalance the shocks, preventing the destruction of economic capacity and inducing a V-shaped recovery. However, when shocks are deep and persistent enough, like during the Great Recession, they call for a downward revision of potential output measures, the so-called switching-track, weakening the recovering role of monetary policy and inducing an L-shaped recovery. When calibrated to the U.S. economy, the model replicates well the L-shaped recovery and switching-track that followed the Great Recession, as well as the V-shaped recoveries that followed the oil shock recessions.
- JEL Code:
- E12,E22,E32,O41,E52
- 5 October 2021
-
Statistics Paper Series - Issue No. 41Details
- Abstract:
- In carrying out its banking supervision tasks as part of the Single Supervisory Mechanism (SSM), the European Central Bank (ECB) collects and disseminates data on significant and less significant institutions. To ensure harmonised supervisory reporting standards, the data are represented through the European Banking Authority’s data point model, which defines all the relevant business concepts and the validation rules. For the purpose of data quality assurance and assessment, ECB experts may implement additional plausibility checks on the data. The ECB is constantly seeking ways to improve these plausibility checks in order to detect suspicious or erroneous values and to provide high-quality data for the SSM.
- JEL Code:
- C18,C63,C81,E58,G28
- 5 October 2021
-
Euro money market statistics
- 4 October 2021
-
Working Paper Series - Issue No. 2595Details
- Abstract:
- We study the relationship between banks’ size and risk-taking in the context of supranational banking supervision. Consistently with theoretical work on banking unions and in contrast to analyses emphasising incentives underpinned by the too-big-to-fail effect, we find an inverse relationship between banks’ size and non-performing loan growth for a sample of European banks. Evidence is provided that the mechanism operates through the enhanced organisational efficiency of the supranational set-up rather than incentives alignment among the supervisors and the banks.
- JEL Code:
- F33,G21,G28,G32,C20
- 4 October 2021
-
Working Paper Series - Issue No. 2594Details
- Abstract:
- Central banks have intensified their communication with non-experts – an endeavour which some have argued is bound to fail. This paper studies English and German Twitter traffic about the ECB to understand whether its communication is received by non-experts and how it affects their views. It shows that Twitter traffic is responsive to ECB communication, also for non-experts. For several ECB communication events, Twitter constitutes primarily a channel to relay information: tweets become more factual and the views expressed more moderate and homogeneous. Other communication events, such as former President Draghi’s “Whatever it takes” statement, trigger persistent traffic and a divergence in views. Also, ECB-related tweets are more likely to get retweeted or liked if they express stronger or more subjective views. Thus, Twitter also serves as a platform for controversial discussions. The findings suggest that central banks manage to reach non-experts, i.e. their communication is not a road to nowhere.
- JEL Code:
- E52,E58
- 4 October 2021
-
Euro area economic and financial developments by institutional sector (early)
- 4 October 2021
-
Balance of payments (quarterly)
- 1 October 2021
-
SpeechDetails
- Subtitle:
- Speech by Isabel Schnabel, Member of the Executive Board of the ECB, at the Federal Reserve Bank of New York conference on “Implications of Federal Reserve Actions in Response to the COVID-19 Pandemic”
Annexes- 1 October 2021
-
Speech
- 1 October 2021
-
Working Paper Series - Issue No. 2593Details
- Abstract:
- This paper develops a simple analytical framework to study the impact of central bank policy-rate changes on banks’ credit supply and risk-taking incentives. Unobservable expost bank monitoring of loans creates an external-financing constraint, which determines bank leverage. Unobservable, costly ex-ante screening of borrowers determines the level of bank risk-taking. More risk-taking tightens the external-financing constraint. The policy rate affects the external-financing constraint because it affects both the return on outside investors’ alternative investments and loan rates. In a low rate environment, a policy-rate cut reduces bank funding costs less because of a zero lower bound (ZLB) on retail deposit rates. Bank risk-taking is a necessary but not sufficient for a policy-rate cut to become contractionary ("reversal"). Reversal can occur even though banks’ net-interest margins increase. Credit market competition plays an important role for the interplay of monetary policy and financing stability. When banks have market power, a policy-rate cut can increase lending and still lead to risk-taking. We use our analytical framework to discuss the literature on how monetary policy affects the credit supply of banks, with special emphasis on low and negative rates.
- JEL Code:
- E44,E52,E58,G20,G21
- Network:
- Research Task Force (RTF)
- 1 October 2021
-
Working Paper Series - Issue No. 2592Details
- Abstract:
- Using new quarterly narrative evidence, this paper examines the macroeconomic impact of reforms of unemployment benefits (UB) and employment protection legislation (EPL) in the euro area from a Bayesian narrative panel VAR. The approach complements existing micro-econometric evidence by aligning short- and mediumterm effects in a unified framework and assessing state dependencies. Liberalising reforms result in temporary wage declines and highly persistent increases in economic activity and employment. In contrast to UB reforms, the effects of EPL reforms on employment emerge only gradually.
- JEL Code:
- E32,J08,O43
- 1 October 2021
-
Discussion Paper Series - Issue No. 16Details
- Abstract:
- This paper develops a simple analytical framework to study the impact of central bank policy-rate changes on banks’ credit supply and risk-taking incentives. Unobservable expost bank monitoring of loans creates an external-financing constraint, which determines bank leverage. Unobservable, costly ex-ante screening of borrowers determines the level of bank risk-taking. More risk-taking tightens the external-financing constraint. The policy rate affects the external-financing constraint because it affects both the return on outside investors’ alternative investments and loan rates. In a low rate environment, a policy-rate cut reduces bank funding costs less because of a zero lower bound (ZLB) on retail deposit rates. Bank risk-taking is a necessary but not sufficient for a policy-rate cut to become contractionary ("reversal"). Reversal can occur even though banks’ net-interest margins increase. Credit market competition plays an important role for the interplay of monetary policy and financing stability. When banks have market power, a policy-rate cut can increase lending and still lead to risk-taking. We use our analytical framework to discuss the literature on how monetary policy affects the credit supply of banks, with special emphasis on low and negative rates.
- JEL Code:
- E44,E52,E58,G20,G21
- 1 October 2021
-
MFI interest rate statistics
- 30 September 2021
- 30 September 2021
- 30 September 2021
-
SpeechDetails
- Subtitle:
- Introductory remarks by Fabio Panetta, Member of the Executive Board of the ECB, at the sixth meeting of the Euro Cyber Resilience Board for pan-European Financial Infrastructures (ECRB)
- 29 September 2021
-
Working Paper Series - Issue No. 2591Details
- Abstract:
- We investigate which variables have supported growth in the euro area over the last 30 years. This is a challenging task due to dimensionality problems: a large set of potential determinants, limited data, and the prospect that some variables could be non-stationary. We assemble a set of 35 real, financial, monetary, and institutional variables for nine of the original euro area countries covering the period between 1990Q1 and 2016Q4. Using the Weighted-Average Least Squares method, we gather clues about which variables to select. We quantify the impact of various determinants of growth in the short and long runs. Our main finding is the positive and robust role of EU institutional integration on long-term growth for all countries in the sample. An improvement in competitiveness matters for growth in the overall euro area in the long run, as well as a decline in sovereign and systemic stress. Debt over GDP negatively influences growth for the periphery, but only in the short run. Property and equity prices have a significant impact only in the short run, whereas the loans to non-financial corporations positively affect the core euro area. An increase in global GDP also supports growth in the euro area.
- JEL Code:
- C23,E40,F33,F43
- 28 September 2021
-
Weekly financial statementAnnexes
- 28 September 2021
-
Weekly financial statement - Commentary
- 28 September 2021
-
SpeechDetails
- Subtitle:
- Speech by Christine Lagarde, President of the ECB, at ECB Forum on Central Banking "Beyond the pandemic: the future of monetary policy"
- 27 September 2021
-
SpeechDetails
- Subtitle:
- Introductory statement by Christine Lagarde, President of the ECB, at the Hearing of the Committee on Economic and Monetary Affairs of the European Parliament (by videoconference)
Annexes- 26 September 2021
- 27 September 2021
-
Monetary developments in the euro areaAnnexes
- 27 September 2021
-
Monetary developments in the euro area
- 24 September 2021
-
SpeechDetails
- Subtitle:
- Panel contribution by Philip R. Lane, Member of the Executive Board of the ECB, to the 5th Joint Regional Financing Arrangements Research Seminar organised by the European Stability Mechanism
- 24 September 2021
-
Governing Council decisions - Other decisions
- 24 September 2021
-
InterviewDetails
- Subtitle:
- Interview with Christine Lagarde, President of the ECB, conducted by Annette Weisbach, CNBC, on 23 September
- 23 September 2021
-
SpeechDetails
- Subtitle:
- Speech by Frank Elderson, Member of the Executive Board of the ECB and Vice-Chair of the Supervisory Board of the ECB, at the 8th Conference on the Banking Union, Goethe University, Frankfurt am Main
- 23 September 2021
-
Working Paper Series - Issue No. 2590Monetary policy, agent heterogeneity and inequality: insights from a three-agent New Keynesian modelDetails
- Abstract:
- In this paper I develop a New Keynesian dynamic stochastic general equilibrium model which features three different types of representative agents (THRANK): the poor hand-to-mouth, the wealthy hand-to-mouth and the non-hand-to mouth households. Compared to a full-scale HANK model, this model is easier to compute while reproducing many of the same monetary policy shock transmission channels. I show that monetary policy transmission takes place through a redistribution channel, as emphasised by Auclert (2019). In particular, the effects of a monetary policy shock are amplified as resources are redistributed from high-MPC households to low-MPC households. Monetary policy therefore becomes more effective compared to models with homogeneous MPC rates. Consumption inequality is countercyclical in this setting and a high degree of leverage amplifies the redistribution channel. These findings have important implications for understanding the effects of both monetary and macroprudential policy.
- JEL Code:
- D31,E12,E21,E43,E52
- 23 September 2021
-
Working Paper Series - Issue No. 2589Details
- Abstract:
- We explore the ties between bonds and individual dealers formed through home advantage and the persistence of previous underwriting relationships. Building on these connections, we show that the introduction of the leverage ratio for the European banks had a large impact on exposed bonds’ liquidity. Moreover, based on these ties, we show that bond mutual fund panic following the 2020 pandemic outbreak affected substantially more mutual funds with the larger exposures to dealer banks’ balance sheet constraints.
- JEL Code:
- G12,G18,G21
- 23 September 2021
-
Economic Bulletin
- 23 September 2021
-
Economic Bulletin - BoxEconomic Bulletin Issue 6, 2021Details
- Abstract:
- In its climate change action plan, the ECB committed to accelerating the development of new models and conducting theoretical and empirical analyses to monitor the implications of climate change and related policies for the economy. As a first step in its detailed roadmap of climate-related actions, the ECB envisages the inclusion of technical assumptions on carbon pricing in Eurosystem/ECB staff projections. Against this backdrop, this box summarises the genesis and basic features of the EU emissions trading system (ETS), the system setting the carbon price in the EU. The EU ETS, which began operating in 2005, is a “cap and trade” system where a cap is set by the EU on the total amount of greenhouse gases that can be emitted by the activities covered by the system. It has been implemented in “phases” designed to gradually reduce the cap while increasing the scope of the system. In July 2021 a revision of the EU ETS was proposed in the context of the “Fit for 55” package. Meanwhile, the price of emissions allowances traded on the EU ETS has increased from €8 per tonne of carbon dioxide equivalent at the beginning of 2018 to around €60 more recently. So far, the main impact of changes in emissions allowance prices has been on HICP energy inflation, and, overall, the risk that emissions allowance prices under the current EU ETS may translate into significantly higher headline inflation in the near term appears limited. However, against the backdrop of the ECB’s recently announced action plan, these and other climate change mitigation polices will be further explored with regard to their implications for macroeconomic modelling and monetary policy.
- JEL Code:
- E31,Q43,Q54
- 23 September 2021
-
Economic Bulletin - BoxEconomic Bulletin Issue 6, 2021Details
- Abstract:
- This box documents recent transport and input-related bottlenecks in global trade and shows how euro area countries have been particularly affected. An empirical analysis assesses the impact of supply bottlenecks on global and euro area export growth and estimates the cumulated shortfall for the level of goods exports to be 6.7% for the euro area and 2.3% for the rest of the world.
- JEL Code:
- F10,D24,E23,E31
- 22 September 2021
- 22 September 2021
-
Occasional Paper Series - Issue No. 282Details
- Abstract:
- This paper discusses commercial banks’ demand for central bank reserves under two alternative monetary policy framework configurations, namely: (i) an interest rate corridor system with scarce liquidity, and (ii) a floor system with ample liquidity. It outlines the interaction between the monetary implementation framework used to steer short-term market interest rates and banks’ demand for reserves. We find that by implementing a floor system, the Eurosystem has eliminated the opportunity costs of holding reserves and enabled banks to hold relatively large buffers of reserves compared with the corridor system. Additionally, the demand for reserves may have increased endogenously, as the environment of ample liquidity conditions has incentivised many banks to adapt their business models. In parallel, the demand for reserves has also increased for more exogenous reasons such as post-global financial crisis liquidity regulation and increased liquidity concentration. Our estimates indicate an increase, over recent years, in the level of excess liquidity required in the euro area to avoid a rise in short-term market rates. Moreover, the dependency on the adopted monetary policy instruments and the external environment highlights the increased uncertainty in estimating future levels of required reserves
- JEL Code:
- E41,E44,E50,E51,E58
- 22 September 2021
- 22 September 2021
-
Occasional Paper Series - Issue No. 281Details
- Abstract:
- Climate change is one of the greatest challenges facing humankind this century. If left unchecked, it is likely to result in more frequent and severe climatic events, with the potential to cause substantial disruption to our economies, businesses and livelihoods in the coming decades. Yet the associated risks remain poorly understood, as climate shocks differ from the financial shocks observed during previous crises. This paper describes the ECB’s economy-wide climate stress test, which has been developed to assess the resilience of non-financial corporates (NFCs) and euro area banks to climate risks, under various assumptions in terms of future climate policies. This stress test comprises three main pillars: (i) climate-specific scenarios to project climate and macroeconomic conditions over the next 30 years; (ii) a comprehensive dataset that combines climate and financial information for millions of companies worldwide and approximately 1,600 consolidated euro area banks; (iii) a novel set of climate-specific models to capture the direct and indirect transmission channels of climate risk drivers for firms and banks.
- JEL Code:
- C53,C55,G21,G38,Q54
- 22 September 2021
-
Euro area pension fund statisticsAnnexes
- 22 September 2021
-
Euro area pension fund statistics
- 22 September 2021
-
Economic Bulletin - BoxEconomic Bulletin Issue 6, 2021Details
- Abstract:
- This box assesses the health of the euro area non-financial corporate sector at an aggregate level during the coronavirus (COVID-19) pandemic using the quarterly sectoral accounts. The results suggest that non-financial corporate liquidity was safeguarded at the aggregated sector level. This was mainly due to a build-up of cash buffers, as is typical for crisis periods, and the timely and extensive reactions from the monetary, fiscal and supervisory authorities. Policy interventions provided direct and indirect support to non-financial corporations and enabled firms to substantially increase their recourse to debt financing. However, non-financial corporate profitability, operating efficiency, indebtedness and vulnerabilities came under pressure, increasing the risk of a rise in firm defaults in the future.
- JEL Code:
- E22,E32
- 22 September 2021
-
Research Bulletin - Issue No. 87Details
- Abstract:
- Many countries have implemented macroprudential policies. The aims are twofold: first, to render the financial system more resilient to shocks and, second, to prevent booms and busts in the financial system in response to economic cycles. This article provides theoretical and empirical evidence which shows the positive impact that these measures have on financial stability, as well as the gains in economic growth derived from a stronger financial system.
- JEL Code:
- G21
- Network:
- Research Task Force (RTF)
- 22 September 2021
-
Research Bulletin - Issue No. 87Details
- Abstract:
- The effect of policy rate cuts on bank lending and risk-taking depends on how the low interest rate environment affects banks’ ability to raise external financing. When interest rates are low, easing monetary policy relaxes banks’ external financing constraint less than when interest rates are high. This reduces the stimulus to bank lending and induces banks to take more risk. There are indeed side effects of monetary stimulus at the zero-lower bound (ZLB).
- JEL Code:
- E44,E52,E58,G20,G21
- Network:
- Research Task Force (RTF)
- 22 September 2021
-
Research Bulletin - Issue No. 87Details
- Abstract:
- When considering the use of macroprudential instruments to manage financial imbalances, macroprudential policymakers face an intertemporal trade-off between facilitating short-term expected growth and containing medium-term downside risks to the economy. To assist policymakers in assessing this trade-off, in this article we propose a risk management framework which extends the well-known notion of growth-at-risk to consider the entire predictive real GDP growth distribution, with a view to quantifying the macroprudential policy stance. A novel empirical model fitted to euro area data allows us to study direct and indirect interactions between financial vulnerabilities, financial stress and real GDP growth, incorporating non-linear amplification effects among all variables. Our framework can support policymakers by facilitating model-based macro-financial stress tests and model-based assessments of when to adjust macroprudential instruments.
- JEL Code:
- G21,C33
- Network:
- Research Task Force (RTF)
- 21 September 2021
-
Weekly financial statementAnnexes
- 21 September 2021
-
Weekly financial statement - Commentary
- 21 September 2021
-
Occasional Paper Series - Issue No. 280Details
- Abstract:
- From 2013 up to the launch of the ECB’s strategy review in January 2020, inflation in the euro area was low and over-predicted. This low inflation during the years 2013-19 can be attributed to a combination of interconnected factors. Cyclical developments account for a substantial share of the fall in underlying inflation, mainly in the first part of the low inflation period. Additionally, there is evidence that an underestimation of the amount of economic slack and less well-anchored longer-term inflation expectations, in combination with monetary policy in the euro area being constrained by the effective lower bound, have played an important role in the long period of subdued inflation. Ongoing disinflationary structural trends (such as globalisation, digitalisation and demographic factors) are likely to have had a dampening effect on inflation over the last few decades, but were in themselves not the main drivers of low inflation in the euro area from 2013 to 2019. However, as they could not have been easily offset by interest rate policy in an effective lower bound environment, they might also have contributed to the more subdued inflation dynamics in the euro area from 2013 to 2019.
- JEL Code:
- C51,E31,E32,E37,E52,F62,J11,J30
- 21 September 2021
-
Occasional Paper Series - Issue No. 279Details
- Abstract:
- The existence of nominal rigidities and inflation differentials between countries offers two of the main rationales for an inflation buffer in a monetary union where monetary policy is oriented towards an area-wide inflation objective. Evidence accumulated since 2003 suggests that nominal rigidities remain a prevalent feature of the euro area, with some differences as regards prices and wages. Price setting may have become more flexible and there is no evidence for any especially strong downward rigidities in price setting. At the same time, persistent downward nominal wage rigidity (DWR) provides a strong argument for a positive inflation buffer to “grease the wheels” of the euro area economy – also in order to avoid the risk of macroeconomic adjustments being managed in terms of quantities (unemployment) rather than prices when DWR is binding and particularly when productivity growth is low. Inflation differentials across euro area countries have tended to be small but persistent. For inflation dispersion in the euro area, the across countries has been more important than across regions, confirming that an inflation buffer might be especially important in a monetary union of different countries. Overall, inflation differentials were due to the rise of economic and financial imbalances in the first decade of the euro and the subsequent need for adjustment. Balassa-Samuelson effects which were highlighted in the 2003 strategy review were only a minor factor. By and large, the ECB’s inflation objective seems to have provided a sufficient margin to prevent countries from having to live with prolonged periods of excessively low inflation rates in the period 1999-2019. There were some exceptions in the second decade of the euro (from 2009-2019), when inflation in the euro area was, overall, substantially lower than during the first decade.
- JEL Code:
- E31,E52,E24
- 21 September 2021
-
Occasional Paper Series - Issue No. 278Details
- Abstract:
- This paper summarises the work done by Eurosystem staff in the context of the Strategy Review Seminar on Monetary Policy Instruments. More specifically, it focuses on the efficacy, efficiency and potential side effects of the key monetary policy instruments employed by the European Central Bank since 2014. The following main findings emerge from the analysis. First, instruments have been effective in easing financing conditions and supporting economic growth, employment and inflation. Second, considering the effective lower bound on policy rates, a combination of instruments is generally more efficient than relying on a single tool. Third, side effects have been generally contained so far, but they are found to vary over time and need to be closely monitored on an ongoing basis. Fourth, the monetary policy toolkit needs to remain innovative, diversified, and flexible, i.e. reviewed regularly to ensure that it remains fit for purpose against the backdrop of evolving financial and macroeconomic conditions.
- JEL Code:
- E52,E58,E43,E44,E47
- 21 September 2021
-
Occasional Paper Series - Issue No. 277Details
- Abstract:
- This paper discusses the role of economic and monetary analysis in the monetary policy strategy of the European Central Bank (ECB). Both areas of analysis have evolved since the 2003 strategy review. Economic analysis has assigned an increasingly relevant role to the Eurosystem and ECB staff macroeconomic projections in forming a view on the medium-term outlook for economic activity and inflation. Furthermore, its focus has strengthened with regard to structural trends in shaping key economic relationships. Similarly, monetary analysis has shifted in focus: while the 2003 review emphasised the information value of monetary dynamics for detecting risks to price stability over medium-term to longer-term horizons, the focus of monetary analysis has increasingly been redirected to the assessment of monetary policy transmission. This evolution has opened a gap between the formal description of the strategy following the 2003 review and the practice of economic and monetary analysis in informing the ECB’s policy deliberations. This paper concludes by presenting options for closing this gap and aligning the strategy formulation with the evolved role of economic and monetary analysis.
- JEL Code:
- E32,E37,E44,E47,E51,E52,E58
- 21 September 2021
-
Occasional Paper Series - Issue No. 276Details
- Abstract:
- This paper offers an overview of the mandate of the European Central Bank (ECB), as defined by its objectives, the instruments available to achieve them and the constitutional framework that the ECB shall observe in pursuing them. The objectives include the primary objective of maintaining price stability and the secondary objective of supporting the general economic policies in the Union. The price stability objective enjoys primacy amongst the ECB objectives. The Treaties do not provide for a hierarchy of the “general economic policies” that the ECB shall support, although a number of criteria derived from primary law can help in guiding the ECB’s priorities in this respect. The ECB is also tasked with contributing to the “smooth conduct of policies pursued by the competent authorities relating to the prudential supervision of credit institutions and the stability of the financial system”. As for the instruments available, these include both measures that directly pursue the objectives and measures that are instrumental in achieving them. Finally, the other constitutional rules that set out the framework within which the ECB pursues its objectives include the principles of conferral, institutional balance, proportionality, equal treatment and non-discrimination, as well as the principle of an open market economy and the prohibition of monetary financing.
- JEL Code:
- K23,G21,G28
- 21 September 2021
-
Occasional Paper Series - Issue No. 275Details
- Abstract:
- This report discusses the role of the European Union’s full employment objective in the conduct of the ECB’s monetary policy. It first reviews a range of indicators of full employment, highlights the heterogeneity of labour market outcomes within different groups in the population and across countries, and documents the flatness of the Phillips curve in the euro area. In this context, it is stressed that labour market structures and trend labour market outcomes are primarily determined by national economic policies. The report then recalls that, in many circumstances, inflation and employment move together and pursuing price stability is conducive to supporting employment. However, in response to economic shocks that give rise to a temporary trade-off between employment and inflation stabilisation, the ECB’s medium-term orientation in pursuing price stability is shown to provide flexibility to contribute to the achievement of the EU’s full employment objective. Regarding the conduct of monetary policy in a low interest rate environment, model-based simulations suggest that history-dependent policy approaches − which have been proposed to overcome lasting shortfalls of inflation due to the effective lower bound on nominal interest rates by a more persistent policy response to disinflationary shocks − can help to bring employment closer to full employment, even though their effectiveness depends on the strength of the postulated expectations channels. Finally, the importance of employment income and wealth inequality in the transmission of monetary policy strengthens the case for more persistent or forceful easing policies (in pursuit of price stability) when interest rates are constrained by their lower bound.
- JEL Code:
- E52,E24
- 21 September 2021
-
Occasional Paper Series - Issue No. 274Details
- Abstract:
- This paper examines the importance of central bank communication in ensuring the effectiveness of monetary policy and in underpinning the credibility, accountability and legitimacy of independent central banks. It documents how communication has become a monetary policy tool in itself; one example of this being forward guidance, given its impact on inflation expectations, economic behaviour and inflation. The paper explains why and how consistent, clear and effective communication to expert and non-expert audiences is essential in an environment of an ever-increasing need by central banks to reach these audiences. Central banks must also meet the demand for more understandable information about policies and tools, while at the same time overcoming the challenge posed by the wider public’s rational inattention. Since the European Central Bank was established, the communications landscape has changed dramatically and continues to evolve. This paper outlines how better communication, including greater engagement with the wider public, could help boost people’s understanding of and trust in the Eurosystem.
- JEL Code:
- E43,E52,E58
- 21 September 2021
-
Occasional Paper Series - Issue No. 273Details
- Abstract:
- The last review of the ECB’s monetary policy strategy in 2003 followed a period of predominantly upside risks to price stability. Experience following the 2008 financial crisis has focused renewed attention on the question of how monetary and fiscal policy should best interact, in particular in an environment of structurally low interest rates and persistent downside risks to price stability. This debate has been further intensified by the economic impact of the coronavirus (COVID-19) pandemic. In the euro area, the unique architecture of a monetary union consisting of sovereign Member States, with cross-country heterogeneities and weaknesses in its overall construction, poses important challenges. Against this background, this report revisits monetary-fiscal policy interactions in the euro area from a monetary policy perspective and with a focus on the ramifications for price stability and maintaining central bank independence and credibility. The report consists of three parts. The first chapter presents a conceptual framework for thinking about monetary-fiscal policy interactions, thereby setting the stage for a discussion of specifically euro area aspects and challenges in subsequent parts of the report. In particular, it reviews the main ingredients of the pre-global financial crisis consensus on monetary-fiscal policy interactions and addresses significant new insights and refinements which have gained prominence since 2003. In doing so, the chapter distinguishes between general conceptual aspects – i.e. those aspects that pertain to an environment characterised by a single central bank and a single fiscal authority and those aspects that pertain to an environment characterised by a single central bank and many fiscal authorities (a multi-country monetary union). ...
- JEL Code:
- E52,E58,E62,E63,F45
- 21 September 2021
-
Occasional Paper Series - Issue No. 271Details
- Abstract:
- This paper analyses the implications of climate change for the conduct of monetary policy in the euro area. It first investigates macroeconomic and financial risks stemming from climate change and from policies aimed at climate mitigation and adaptation, as well as the regulatory and fiscal effects of reducing carbon emissions. In this context, it assesses the need to adapt macroeconomic models and the Eurosystem/ECB staff economic projections underlying the monetary policy decisions. It further considers the implications of climate change for the conduct of monetary policy, in particular the implications for the transmission of monetary policy, the natural rate of interest and the correct identification of shocks. Model simulations using the ECB’s New Area-Wide Model (NAWM) illustrate how the interactions of climate change, financial and fiscal fragilities could significantly restrict the ability of monetary policy to respond to standard business cycle fluctuations. The paper concludes with an analysis of a set of potential monetary policy measures to address climate risks, insofar as they are in line with the ECB’s mandate.
- JEL Code:
- E52,E58,Q54
- 21 September 2021
-
Occasional Paper Series - Issue No. 270Details
- Abstract:
- The financing structure of the euro area economy has evolved since the global financial crisis with non-bank financial intermediation taking a more prominent role. This shift affects the transmission of monetary policy. Compared with banks, non-bank financial intermediaries are more responsive to monetary policy measures that influence longer-term interest rates, such as asset purchases. The increasing role of debt securities in the financing structure of firms also leads to a stronger transmission of long-rate shocks. At the same time, short-term policy rates remain an effective tool to steer economic outcomes in the euro area, which is still highly reliant on bank loans. Amid a low interest rate environment, the growth of market-based finance has been accompanied by increased credit, liquidity and duration risk in the non-bank sector. Interconnections in the financial system can amplify contagion and impair the smooth transmission of monetary policy in periods of market distress. The growing importance of non-bank financial intermediaries has implications for the functioning of financial market segments relevant for monetary policy transmission, in particular the money markets and the bond markets.
- JEL Code:
- E4,E5,G2,G38
- 21 September 2021
-
Occasional Paper Series - Issue No. 269Details
- Abstract:
- The ECB’s price stability mandate has been defined by the Treaty. But the Treaty has not spelled out what price stability precisely means. To make the mandate operational, the Governing Council has provided a quantitative definition in 1998 and a clarification in 2003. The landscape has changed notably compared to the time the strategy review was originally designed. At the time, the main concern of the Governing Council was to anchor inflation at low levels in face of the inflationary history of the previous decades. Over the last decade economic conditions have changed dramatically: the persistent low-inflation environment has created the concrete risk of de-anchoring of longer-term inflation expectations. Addressing low inflation is different from addressing high inflation. The ability of the ECB (and central banks globally) to provide the necessary accommodation to maintain price stability has been tested by the lower bound on nominal interest rates in the context of the secular decline in the equilibrium real interest rate. Against this backdrop, this report analyses: the ECB’s performance as measured against its formulation of price stability; whether it is possible to identify a preferred level of steady-state inflation on the basis of optimality considerations; advantages and disadvantages of formulating the objective in terms of a focal point or a range, or having both; whether the medium-term orientation of the ECB’s policy can serve as a mechanism to cater for other considerations; how to strengthen, in the presence of the lower bound, the ECB’s leverage on private-sector expectations for inflation and the ECB’s future policy actions so that expectations can act as ‘automatic stabilisers’ and work alongside the central bank.
- JEL Code:
- E31,E52,E58
- 21 September 2021
-
Occasional Paper Series - Issue No. 268Details
- Abstract:
- The aim of this report is to foster a better understanding of past trends in, and drivers of, productivity growth in the countries of the European Union (EU) and of the interplay between productivity and monetary policy. To this end, a group of experts from 15 national central banks and the European Central Bank (ECB) joined forces and pooled data and expertise for more than 18 months to produce the report. Group members drew on the extensive research already conducted on productivity growth, including within the European System of Central Banks and in the context of the review of the ECB’s monetary policy strategy, and worked together to conduct new analyses.
- JEL Code:
- D22,D24,D61,O33,O47,O52
- 21 September 2021
-
Occasional Paper Series - Issue No. 267Details
- Abstract:
- This paper provides an assessment of the macroeconomic models regularly used for forecasting and policy analysis in the Eurosystem. These include semi-structural, structural and time-series models covering specific jurisdictions and the euro area within a closed economy, small open economy, multi-country or global setting. Models are used as analytical frameworks for building baseline projections and for supporting the preparation of monetary policy decisions. The paper delivers four main contributions. First, it provides a survey of the macroeconomic modelling portfolios currently used or under development within the Eurosystem. Second, it explores the analytical gaps in the Eurosystem models and investigates the scope for further enhancement of the main projection and policy models, and the creation of new models. Third, it reviews current practices in model-based analysis for monetary policy preparation and forecasting and provides recommendations and suggestions for improvement. Finally, it reviews existing cooperation modalities on model development and proposes alternative sourcing and organisational strategies to remedy any knowledge or analytical gaps identified.
- JEL Code:
- C5,E47,E52,E58,F4
- 21 September 2021
-
Occasional Paper Series - Issue No. 266Details
- Abstract:
- The digitalisation workstream report analyses the degree of digital adoption across the euro area and EU countries and the implications of digitalisation for measurement, productivity, labour markets and inflation, as well as more recent developments during the coronavirus (COVID-19) pandemic and their implications. Analysis of these key issues and variables is aimed at improving our understanding of the implications of digitalisation for monetary policy and its transmission. The degree of digital adoption differs across the euro area/EU, implying heterogeneous impacts, with most EU economies currently lagging behind the United States and Japan. Rising digitalisation has rendered price measurement more challenging, owing to, among other things, faster changes in products and product quality, but also new ways of price setting, e.g. dynamic or customised pricing, and services that were previously payable but are now “free”. Despite the spread of digital technologies, aggregate productivity growth has decreased in most advanced economies since the 1970s. However, it is likely that without the spread of digital technologies the productivity slowdown would have been even more pronounced, and the recent acceleration in digitalisation is likely to boost future productivity gains from digitalisation. Digitalisation has spurred greater automation, with temporary labour market disruptions, albeit unevenly across sectors. The long-run employment effects of digitalisation can be benign, but its effects on wages and labour share depend on the structure of the economy and its labour market institutions. The pandemic has accelerated the use of teleworking: roughly every third job in the euro area/EU is teleworkable, although there are differences across countries. ...
- JEL Code:
- E24,E31,E32,O33,O57
- 21 September 2021
-
Occasional Paper Series - Issue No. 265Details
- Abstract:
- This paper – which takes into consideration overall experience with the Harmonised Index of Consumer Prices (HICP) as well as the improvements made to this measure of inflation since 2003 – finds that the HICP continues to fulfil the prerequisites for the index underlying the ECB’s definition of price stability. Nonetheless, there is scope for enhancing the HICP, especially by including owner-occupied housing (OOH) using the net acquisitions approach. Filling this long-standing gap is of utmost importance to increase the coverage and cross-country comparability of the HICP. In addition to integrating OOH into the HICP, further improvements would be welcome in harmonisation, especially regarding the treatment of product replacement and quality adjustment. Such measures may also help reduce the measurement bias that still exists in the HICP. Overall, a knowledge gap concerning the exact size of the measurement bias of the HICP remains, which calls for further research. More generally, the paper also finds that auxiliary inflation measures can play an important role in the ECB’s economic and monetary analyses. This applies not only to analytical series including OOH, but also to measures of underlying inflation or a cost of living index.
- JEL Code:
- C43,C52,C82,E31,E52
- 21 September 2021
-
Occasional Paper Series - Issue No. 264Details
- Abstract:
- This paper summarises the findings of the Eurosystem’s Expert Group on Inflation Expectations (EGIE), which was one of the 13 work streams conducting analysis that fed into the ECB’s monetary policy strategy review. The EGIE was tasked with (i) reviewing the nature and behaviour of inflation expectations, with a focus on the degree of anchoring, and (ii) exploring the role that measures of expectations can play in forecasting inflation. While it is households’ and firms’ inflation expectations that ultimately matter in the expectations channel, data limitations have meant that in practice the focus of analysis has been on surveys of professional forecasters and on market-based indicators. Regarding the anchoring of inflation expectations, this paper considers a number of metrics: the level of inflation expectations, the responsiveness of longer-term inflation expectations to shorter-term developments, and the degree of uncertainty. Different metrics can provide conflicting signals about the scale and timing of potential unanchoring, which underscores the importance of considering all of them. Overall, however, these metrics suggest that in the period since the global financial and European debt crises, longer-term inflation expectations in the euro area have become less well anchored. Regarding the role measures of inflation expectations can play in forecasting inflation, this paper finds that they are indicative for future inflationary developments. When it comes to their predictive power, both market-based and survey-based measures are found to be more accurate than statistical benchmarks, but do not systematically outperform each other. Beyond their role as standalone forecasts, inflation expectations bring forecast gains when included in forecasting models and can also inform scenario and risk analysis in projection exercises performed using structural models. ...
- JEL Code:
- D84,E31,E37,E52
- 21 September 2021
-
Occasional Paper Series - Issue No. 263Details
- Abstract:
- This paper assesses how globalisation has shaped the economic environment in which the ECB operates and discusses whether this warrants adjustments to the monetary policy strategy. The paper first looks at how trade and financial integration have evolved since the last strategy review in 2003. It then examines the effects of these developments on global productivity growth, the natural interest rate (r*), inflation trends and monetary transmission. While trade globalisation initially boosted productivity growth, this effect may be waning as trade integration slows and market contestability promotes a winner-takes-all environment. The impact of globalisation on r* has been ambiguous: downward pressures, fuelled by global demand for safe assets and an increase in the propensity to save against a background of rising inequality, are counteracted by upward pressures, from the boost to global productivity associated with greater trade integration. Headline inflation rates have become more synchronised globally, largely because commodity prices are increasingly determined by global factors. Meanwhile, core inflation rates show a lower degree of commonality. Globalisation has made a rather modest contribution to the synchronised fall in trend inflation across countries and contributed only moderately to the reduction in the responsiveness of inflation to changes in activity. Regarding monetary transmission, globalisation has made the role of the exchange rate more complex by introducing new mechanisms through which it affects financial conditions, real activity and price dynamics. Against the background of this discussion, the paper then examines the implications for the ECB’s monetary policy strategy. In doing so, it asks two questions. How is the ECB’s economic and monetary analysis affected by globalisation? And how does globalisation influence the choice of the ECB’s monetary policy objective and instruments? ...
- JEL Code:
- E58,F42,F44,F62,F65
- 21 September 2021
-
Economic Bulletin - BoxEconomic Bulletin Issue 6, 2021Details
- Abstract:
- This box describes the ECB’s monetary policy operations and liquidity developments during the third and fourth reserve maintenance periods of 2021 (28 April 2021 to 27 July 2021).
- JEL Code:
- E40,E52,E58
- 21 September 2021
-
Economic Bulletin - BoxEconomic Bulletin Issue 6, 2021Details
- Abstract:
- Before the start of the coronavirus (COVID-19) pandemic, HICP inflation was relatively subdued in the euro area, standing at 1.2% in February 2020. In the United States, CPI inflation was substantially stronger, at 2.3% in the same month. After having declined over 2020, headline inflation has increased strongly in the United States and the euro area over recent months. Most of the increase, especially in the United States, has been driven by only a few items in the consumption baskets – including energy prices. Looking at developments in underlying inflation, US CPI inflation less food and energy has increased strongly, significantly surpassing its pre-pandemic levels, while HICP inflation excluding energy and food (HICPX) in the euro area has remained below its pre-pandemic levels – reflecting in part a still larger amount of slack in the euro area economy. Recent increases in inflation have pushed up the short-term inflation expectations of professional forecasters for the United States and, to a much lesser extent, also for the euro area, but inflation rates are expected to decrease substantially again over the first half of 2022. A substantial part of the strong increases in inflation over recent months in the United States and the euro area can be attributed to special factors that are likely to be of a temporary nature. For a more permanent increase in inflation, price pressures would usually need to become more broad-based (especially in the euro area) and also reflect increasing labour cost pressures. However, there is so far no firm indication of the latter once the effects of changes in the composition of employment and of job retention schemes are taken into account.
- JEL Code:
- E31,E24,J3,D84
- 20 September 2021
-
Occasional Paper Series - Issue No. 272Details
- Abstract:
- Since the European Central Bank’s (ECB’s) 2003 strategy review, the importance of macro-financial amplification channels for monetary policy has increasingly gained recognition. This paper takes stock of this evolution and discusses the desirability of further incremental enhancements in the role of financial stability considerations in the ECB’s monetary policy strategy. The paper starts with the premise that macroprudential policy, along with microprudential supervision, is the first line of defence against the build-up of financial imbalances. It also recognises that the pursuit of price stability through monetary policy, and of financial stability through macroprudential policy, are to a large extent complementary. Nevertheless, macroprudential policy may not be able to ensure financial stability independently of monetary policy, because of spillovers originating from the common transmission channels through which the two policies produce their effects. For example, a low interest rate environment can create incentives to engage in more risk-taking, or can adversely impact the profitability of financial intermediaries and hence their capacity to absorb shocks. The paper argues that the existence of such spillovers creates a conceptual case for monetary policy to take financial stability considerations into account. It then goes on to discuss what this conclusion might imply in practice for the ECB. One option would be to exploit the flexible length of the medium-term horizon over which price stability is to be achieved. Longer deviations from price stability could occasionally be tolerated, if they resulted in materially lower risks for financial stability and, ultimately, for future price stability. However, model-based quantitative analysis suggests that this approach may require impractically drawn-out periods of deviation from price stability and potentially result in a de-anchoring of inflation expectations. ...
- JEL Code:
- E3,E44,G01,G21
- 20 September 2021
-
SpeechDetails
- Subtitle:
- Speech by Isabel Schnabel, Member of the Executive Board of the ECB, at the Annual Conference of Latvijas Banka on "Sustainable Economy in Times of Change"
Annexes- 20 September 2021
-
Speech
- 20 September 2021
-
Economic Bulletin - ArticleEconomic Bulletin Issue 6, 2021Details
- Abstract:
- The third series of targeted longer-term refinancing operations (TLTRO III) enabled one of the largest liquidity injections by the European Central Bank (ECB). This article provides an assessment of the effectiveness of the operations in supporting bank lending conditions. It discusses the main transmission channels of TLTRO III, including in relation to other policy measures. This article also includes a box on the importance of collateral easing measures, a box on the impact of TLTRO III on money market rates, and a box on the consequences of high participation in TLTRO III for excess liquidity levels. The article then documents, based on hard data on banks’ balance sheets and soft information from bank surveys, the extent to which TLTRO III has eased bank lending conditions, thereby helping to support access to credit for households and firms during the coronavirus (COVID-19) crisis.
- JEL Code:
- E51,E52,E58,G01,G21
- 20 September 2021
-
Economic Bulletin - ArticleEconomic Bulletin Issue 6, 2021Details
- Abstract:
- This article analyses the evolution of hours worked per worker in the euro area, in the light of their relevance for the labour contribution to the production of goods and services and for the capacity of the labour market to adjust to macroeconomic developments. Annual hours worked per worker in the euro area have been on a downward trend. Between 1995 and 2019, they declined by more than a hundred hours per worker, from 1,681 to 1,476. Most of this decline results from a rising share of part-time work which in turn can mainly be explained by the increasing labour force participation of women. Labour supply factors have a clear impact as most people working part-time do so voluntarily. Hours worked per worker also play an important role in the adjustment of the labour market during cyclical downturns, as some firms choose to reduce hours per worker to protect employment. This feature is an important factor in assessing the strength of the labour market during subsequent recoveries.
- JEL Code:
- E24,E32,J22
- 17 September 2021
-
Survey of Monetary Analysts - Aggregate results
- 17 September 2021
-
InterviewDetails
- Subtitle:
- Interview with Luis de Guindos, Vice-President of the ECB, conducted by Joost van Kuppeveld and Daan Ballegeer
- 17 September 2021
- 17 September 2021
- 17 September 2021
- 17 September 2021
- 17 September 2021
-
Balance of payments (monthly)
- 16 September 2021
-
InterviewDetails
- Subtitle:
- Interview with Christine Lagarde, President of the ECB, conducted by David Rubenstein, Bloomberg, on 13 September
- 15 September 2021
-
SpeechDetails
- Subtitle:
- Presentation by Philip R. Lane, Member of the Executive Board of the ECB, at the IMFS Policy Webinar
- 15 September 2021
-
SpeechDetails
- Subtitle:
- Speech by Isabel Schnabel, Member of the Executive Board of the ECB, at the Bond Market Contact Group meeting
Annexes- 15 September 2021
- 14 September 2021
-
The ECB BlogDetails
- Subtitle:
- While rising inflation understandably worries people, current inflation rates should be interpreted with caution, writes Executive Board member Isabel Schnabel.
- 14 September 2021
-
Weekly financial statementAnnexes
- 14 September 2021
-
Weekly financial statement - Commentary
- 14 September 2021
-
Occasional Paper Series - Issue No. 262Details
- Abstract:
- The global recession caused by the COVID-19 pandemic and the resulting deterioration in many countries’ public finances have increased the risk of sovereign debt crises. Although crisis prevention remains paramount, these developments have made it imperative to re-examine the adequacy of the current toolkit for crisis management and resolution, in a context where changes in the creditor base and in the composition of public debt instruments have brought about new challenges in terms of reduced transparency and additional barriers to achieving inter-creditor equity. This report focuses on the international architecture for sovereign debt restructurings (SODRs), as seen through the lenses of the International Monetary Fund (IMF or “the Fund”) and with a special attention to the role that the Fund can play in facilitating orderly restructuring processes. It provides a set of findings and recommendations in relation to certain key elements of the Fund’s lending framework that have important ramifications on SODR processes, namely debt sustainability assessments (DSAs), the exceptional access policy (EAP) for financing above normal access limits, and the criteria for lending to countries with payments arrears to private creditors (LIA) or official bilateral creditors (LIOA). It also considers other indirect channels through which the Fund can affect SODRs, including its support for enhancing the transparency and public disclosure of sovereign debt information, its collaboration with the Paris Club and the G20 debt-related initiatives, the promotion of contractual standards for sovereign debt, and the monitoring of relevant legislative developments.
- JEL Code:
- F34,F55,H63
- 13 September 2021
- 13 September 2021
-
Working Paper Series - Issue No. 2588Details
- Abstract:
- In response to the coronavirus (Covid-19) pandemic, there has been a complementary approach to monetary and fiscal policy in the United States with the Federal Reserve System purchasing extraordinary quantities of securities and the government running a deficit of some 17% of projected GDP. The Federal Reserve pushed the discount rate close to zero and stabilised financial markets with emergency liquidity provided through a new open-ended long-term asset purchase programme. To capture the interventions, we develop a model in which the central bank uses reserves to buy much of the huge issuance of government bonds and this offsets the impact of shutdowns and lockdowns in the real economy. We show that these actions reduced lending costs and amplified the impact of supportive fiscal policies. We then run a counterfactual analysis which suggests that if the Federal Reserve had not intervened to such a degree, the economy may have experienced a significantly deeper contraction as a result from the Covid-19 pandemic.
- JEL Code:
- E31,E40,E51
- 13 September 2021
-
SpeechDetails
- Subtitle:
- Speech by Isabel Schnabel, Member of the Executive Board of the ECB, 148th Baden-Baden Entrepreneurs’ Talk
Annexes- 13 September 2021
-
Speech
- 10 September 2021
-
Working Paper Series - Issue No. 2587Details
- Abstract:
- We analyse the implications of asymmetric monetary policy rules by estimating Markov-switching DSGE models for the euro area (EA) and the US. The estimations show that until mid-2014 the ECB’s response to inflation was more forceful when inflation was above 2% than below 2%. Since then, the ECB’s policy can be characterised as symmetric, and we quantify the macroeconomic implications of this policy change. We uncover asymmetries also in the Fed’s policy, which has responded more strongly in times of crisis. We compute an optimal simple rule for the EA and the US in an environment with the effective lower bound and a low neutral real rate, and find that it prescribes a stronger response to inflation and the output gap when inflation is below target compared to when it is above target. We document its stabilisation properties had this optimal rule been implemented over the last two decades.
- JEL Code:
- E52,E58,E31,E32
- 10 September 2021
-
Euro area securities issues statisticsAnnexes
- 10 September 2021
-
Euro area securities issues statistics
- 10 September 2021
-
Euro area securities issues statistics
- 9 September 2021
-
Macroeconomic projections for the euro areaAnnexes
- 9 September 2021
-
Macroeconomic projections for the euro area
- 9 September 2021
-
Monetary policy statementDetails
- Subtitle:
- Christine Lagarde, President of the ECB,
Luis de Guindos, Vice-President of the ECB
- 9 September 2021
-
Monetary policy decision
- 7 September 2021
-
Weekly financial statementAnnexes
- 7 September 2021
-
Weekly financial statement - Commentary
- 1 September 2021
-
InterviewDetails
- Subtitle:
- Interview with Christine Lagarde, President of the ECB, conducted by Klaus Schwab, Founder and Executive Chairman of the World Economic Forum, on 30 August 2021
- 1 September 2021
-
MFI interest rate statistics
- 1 September 2021
-
InterviewDetails
- Subtitle:
- Interview with Luis de Guindos, Vice-President of the ECB, conducted by Miquel Roig and Jorge Zuloaga on 26 August and published on 1 September 2021
- 31 August 2021
-
The ECB BlogDetails
- Subtitle:
- The existential threat posed by climate change implies that central banks must not stand on the sidelines in the fight against global warming, writes Executive Board member Isabel Schnabel. Our ambitious climate action plan outlines how the ECB will contribute within its mandate.
- 31 August 2021
-
Weekly financial statementAnnexes
- 31 August 2021
-
Weekly financial statement - Commentary
- 31 August 2021
-
Occasional Paper Series - Issue No. 261Details
- Abstract:
- Asset encumbrance is a central concept in the context of banks’ liquidity crises, as it is associated with their capacity to obtain secured funding. This occasional paper summarises the work carried out by the task force on asset encumbrance, bringing together analyses by the ECB and those national competent authorities working on the topic. First, we describe how asset encumbrance has evolved in euro area banks, focusing on country and business model aggregates. Second, we conduct an econometric analysis of the driving factors of banks’ asset encumbrance, highlighting the relevance of credit risk, the availability of high quality collateral suitable for encumbrance, capital and sovereign funding conditions. Third, we turn our focus to the asset encumbrance dynamics of banks that have experienced a crisis. The outcome of this event study analysis indicates that asset encumbrance increases in the lead-up to a crisis, partly to offset early deposit outflows. Building on these findings, we show that asset encumbrance indicators carry predictive information for bank-specific crises as part of a multivariate early warning model.
- JEL Code:
- G21,G01,G28,C23,C49
- 30 August 2021
-
Euro area insurance corporations statisticsAnnexes
- 30 August 2021
-
Euro area insurance corporations statistics
- 27 August 2021
-
Working Paper Series - Issue No. 2586Details
- Abstract:
- We investigate, in the case of Germany, the positive correlation between the cyclical components of the corporate saving glut in the non-financial corporate sector and the current account surplus from a capital account perspective. Employing sign restrictions, our findings suggest that mostly labor supply, world demand and financial friction shocks account for the joint dynamics of excess corporate saving and the current account surplus. Household saving shocks, by contrast, cannot explain the correlation. We conclude that, explained through these factors, the corporate saving glut is an important driver of the cyclical component of the current account.
- JEL Code:
- E32,F32,F45
- 26 August 2021
-
SpeechDetails
- Subtitle:
- Vortrag von Isabel Schnabel, Mitglied des Direktoriums der EZB, bei der regelmäßigen Ökonomenrunde des Bundesministeriums der Finanzen
- 26 August 2021
-
Monetary policy account
- 26 August 2021
-
Monetary developments in the euro areaAnnexes
- 26 August 2021
-
Monetary developments in the euro area
- 25 August 2021
-
InterviewDetails
- Subtitle:
- Interview with Philip R. Lane, Member of the Executive Board of the ECB, conducted by Balazs Koranyi and Frank Siebelt
- 25 August 2021
-
Occasional Paper Series - Issue No. 260Details
- Abstract:
- The Basel Committee on Banking Supervision (BCBS) framework used to identify global systemically important banks (G-SIBs) is based on banks’ balance sheet information, leaving information derived from market data untapped. Among the most widely used market-based systemic risk measures, Adrian and Brunnermeier’s (2016) Delta-Conditional Value at Risk (ΔCoVaR) best captures the system-wide loss-given-default (sLGD) and conditional impact concepts underlying the BCBS GSIB methodology. In this paper we investigate, using a global sample of the largest banks, whether a score based on ΔCoVaR could be useful for ranking G-SIBs or for calibrating an alternative G-SIB indicator weighting scheme. In our first analysis we find that the ΔCoVaR score is positively correlated with all five of the systemic importance categories of the BCBS framework. However, considerable information/noise with regard to the ΔCoVaR score remains unexplained. Before more is known about this residual, a score based on ΔCoVaR is difficult to interpret and is inappropriate for identifying G-SIBs in a policy context. Besides, we find that a ranking based on ΔCoVaR is subject to substantial variability over time and across empirical specifications. In our second analysis we use ΔCoVaR to place the current static weighting scheme for G-SIB indicators on an empirical footing. To do this we regress ΔCoVaR on factors derived from the G-SIB indicators. This approach allows us to focus on the part of ΔCoVaR which can be explained by balance sheet information which alleviates the identified issues of interpretability and variability. The derived weights are highest for the cross-jurisdictional activity (43%) and size (27%) categories. We conclude that ΔCoVaR is not suitable for use as an alternative G-SIB score but could be useful for policymakers to pursue an empirically grounded weighting scheme for the existing G-SIB indicators.
- JEL Code:
- G20,G21,G28
- 25 August 2021
-
Working Paper SeriesDetails
- Abstract:
- Fed monetary policy announcements convey a mix of news about different conventional and unconventional policies, and about the economy. Financial market responses to these announcements are usually very small, but sometimes very large. I estimate the underlying structural shocks exploiting this feature of the data, both assuming that the structural shocks are independent and relaxing this assumption. Either approach yields the same tightly estimated shocks that can be naturally labelled as standard monetary policy, Odyssean forward guidance, large scale asset purchases and Delphic forward guidance.
- JEL Code:
- E52,E58,E44
- 24 August 2021
-
Weekly financial statementAnnexes
- 24 August 2021
-
Weekly financial statement - Commentary
- 24 August 2021
-
SpeechDetails
- Subtitle:
- Speech by Isabel Schnabel, Member of the Executive Board of the ECB, at the Annual Congress of the European Economic Association (EEA)
Annexes- 24 August 2021
-
Speech
- 23 August 2021
-
Survey of Monetary Analysts
- 21 August 2021
-
InterviewDetails
- Subtitle:
- Interview with Isabel Schnabel, Member of the Executive Board of the ECB, conducted by Carla Neuhaus on 17 August and published on 20 August 2021
- 19 August 2021
-
Balance of payments (monthly)
- 19 August 2021
-
The ECB BlogDetails
- Subtitle:
- Our revised forward guidance is a fundamental step in fulfilling our commitment to 2% inflation, writes Chief Economist Philip R. Lane. He also discusses the three conditions that should be met before interest rates are raised.
- 17 August 2021
-
Weekly financial statementAnnexes
- 17 August 2021
-
Weekly financial statement - Commentary
- 17 August 2021
-
Euro area financial vehicle corporation statisticsAnnexes
- 17 August 2021
-
Euro area financial vehicle corporation statistics
- 17 August 2021
-
Euro area investment fund statisticsAnnexes
- 17 August 2021
-
Euro area investment fund statistics
- 17 August 2021
-
Euro money market statistics
- 11 August 2021
-
Euro area securities issues statisticsAnnexes
- 11 August 2021
-
Euro area securities issues statistics
- 11 August 2021
-
Euro area securities issues statistics
- 10 August 2021
-
Weekly financial statementAnnexes
- 10 August 2021
-
Weekly financial statement - Commentary
- 9 August 2021
-
Working Paper Series - Issue No. 2584Details
- Abstract:
- We compare the findings of central bank researchers and academic economists regarding the macroeconomic effects of quantitative easing (QE). We find that central bank papers find QE to be more effective than academic papers do. Central bank papers report larger effects of QE on output and inflation. They also report QE effects on output that are more significant, both statistically and economically, and they use more positive language in the abstract. Central bank researchers who report larger QE effects on output experience more favorable career outcomes. A survey of central banks reveals substantial involvement of bank management in research production.
- JEL Code:
- A11,E52,E58,G28
- 9 August 2021
-
Working Paper Series - Issue No. 2583Details
- Abstract:
- The link between US labor cost and price inflation has weakened notably over the past three decades. In this paper we document this decline and analyse potential contributing factors. We consider four important trends that have shaped the US economy of late: (i) improved anchoring of inflation expectations; (ii) the changing constellation of shocks hitting the economy; (iii) increased trade integration and (iv) rising firm market power. We find that the improved anchoring of inflation expectations has played a particularly relevant role but also that the latter two trends offer promising avenues to understand the decline in pass-through from labor cost to price inflation. Our results also bring supportive evidence to the view taken by the FED in the context of its monetary policy strategy review that a robust job market can be sustained without causing an outbreak of inflation.
- JEL Code:
- C32,E24,E31
- 6 August 2021
-
Working Paper Series - Issue No. 2582Details
- Abstract:
- This paper investigates the impact of ECB communication of its assessment of the economic outlook on ex-ante inflation uncertainty and sheds light on how central bank information shocks operate. The paper finds that ECB communication of new outlook information not only reduces professional forecasters’ disagreement (i.e., the cross-sectional dispersion of their average point forecasts of inflation) but also makes forecasters less uncertain about their own beliefs, thus reducing ex-ante average individual uncertainty. By combining and exploiting these types of ex-ante inflation uncertainty, results suggest that central bank information acts as a “coordination device” able to influence opinions and actions. Most importantly, it generates a “stabilizer effect” by substantially decreasing the dispersion among the inflation point forecasts, which converge towards their unconditional aggregate mean. The results of this paper not only help to explain the impact of new central bank information, but they are also useful for policymakers to define a communication strategy that attenuates ex-ante inflation uncertainty in the most effective way.
- JEL Code:
- D83,E52,E58,E65,G14
- 6 August 2021
-
Working Paper Series - Issue No. 2581Details
- Abstract:
- This paper shows how the combined endogenous reaction of banks and investment funds to an exogenous shock can amplify or dampen losses to the financial system compared to results from single-sector stress testing models. We build a new model of contagion propagation using a very large and granular data set for the euro area. Based on the economic shock caused by the Covid-19 outbreak, we model three sources of exogenous shocks: a default shock, a market shock and a redemption shock. Our contagion mechanism operates through a dual channel of liquidity and solvency risk. The joint modelling of banks and funds provides new insights for the assessment of financial stability risks. Our analysis reveals that adding the fund sector to our model for banks leads to additional losses through fire sales and a further depletion of banks’ capital ratios by around one percentage point.
- JEL Code:
- D85,G01,G21,G23,L14
- 5 August 2021
- 5 August 2021
-
Economic Bulletin
- 5 August 2021
-
Economic Bulletin - ArticleEconomic Bulletin Issue 5, 2021Details
- Abstract:
- This article details the rationale and thinking behind the ECB’s new monetary policy strategy, which was published on 8 July 2021, and its main elements. While the mandate is conferred upon the ECB by the Treaties, the ECB has to devise its monetary policy strategy. This strategy sets out how to achieve the primary objective of maintaining price stability in the euro area, referring to an appropriate set of monetary policy instruments, indicators and intermediate targets, as well as how to take into account other considerations without prejudice to price stability. A monetary policy strategy serves two main purposes: first, it provides policymakers with a coherent analytical framework that maps actual or expected economic developments into policy decisions,second, it serves as a vehicle for communicating with the public. The ECB’s monetary policy strategy was last reviewed in 2003 and the changes that have since occurred to the economic and financial backdrop as well as to the predominant policy challenges warranted an update.
- JEL Code:
- E31,E42,E52,E58,E61
- 5 August 2021
-
Economic Bulletin - BoxEconomic Bulletin Issue 5, 2021Details
- Abstract:
- This box studies the potential consequences of the ongoing shift away from defined benefit (DB) towards defined contribution (DC) products in the insurance and pension fund (ICPF) sector. In view of the different risks associated with these products, their portfolio allocations differ, with DB products being more heavily invested in long-duration fixed-income assets. Given the sizeable amount of ICPFs’ assets under management, the move from DB to DC products can reduce the demand for these assets, potentially having profound effects on the financial system and the economy. Such effects may include a steeper yield curve, a boost to equity financing, and more uncertainty in the build-up of retirement savings.
- JEL Code:
- G22,G23,H55,E34,E44
- 5 August 2021
-
Economic Bulletin - BoxRecent developments in pipeline pressures for non-energy industrial goods inflation in the euro areaEconomic Bulletin Issue 5, 2021Details
- Abstract:
- The recent marked increases in the cost of commodities, raw materials and intermediate products have so far led to only limited upward pressures on consumer goods inflation. Looking ahead, upward pressures on non-energy industrial goods (NEIG) inflation from recent global developments in these input costs are expected to strengthen, as the pass-through generally takes more than one year. How visible and strong the impact on NEIG inflation might be will depend on how persistent the global input cost shocks ultimately are.
- JEL Code:
- E31,Q02,D12
- 5 August 2021
-
Economic Bulletin - BoxEconomic Bulletin Issue 5, 2021Details
- Abstract:
- More than a year after the onset of the COVID-19 crisis, euro area stock prices have risen close to all-time highs, mainly driven by a recovery in earnings expectations. However, COVID-19 and the associated lockdowns have left a larger and longer-lasting mark on some companies than on others. Indeed, earnings expectations have become more heterogeneous across sectors, in line with expectations of an uneven recovery. This stands in sharp contrast with the developments during the Global Financial Crisis, when cross-sectoral dispersion first dropped and then normalised.Empirical analysis suggests that cross-sectoral dispersion in 12-month earnings per share forecasts has increased with each tightening of lockdown measures. At the same time, the start of vaccination campaigns has been a game changer: since the vaccine rollout began in late 2020, more stringent lockdown measures have added far less to the dispersion in earnings expectations.
- JEL Code:
- E44,G10,G12
- 5 August 2021
-
Economic Bulletin - BoxEconomic Bulletin Issue 5, 2021Details
- Abstract:
- This box reports evidence on the heterogeneous impact of the pandemic on euro area countries. It shows that the different impact on activity was largely due to different containment measures, heterogenous sectoral compositions and institutions. Economies with a larger share of high-contact services sectors were hit the hardest, even when lockdown measures eased over time. All euro area governments implemented fiscal support measures, albeit different in size, to alleviate the health and economic consequences of the pandemic. This led to divergence in public finances in 2020 compared with the pre-crisis period. Looking ahead, the Next Generation EU programme is expected to help reduce the economic divergence observed in the euro area in 2020 and foster a more inclusive recovery.
- JEL Code:
- E6,E21,E32
- 4 August 2021
-
Economic Bulletin - ArticleEconomic Bulletin Issue 5, 2021Details
- Abstract:
- This article reviews how policy institutions – international organisations and central banks – use big data and machine learning methods to analyse the business cycle. It provides different examples to show how big data and machine learning methods are particularly suitable for capturing large shocks and non-linearities in real time. The coronavirus crisis is a case in point, where big data have provided invaluable timely signals on the state of the economy, thus helping to track and assess economic activity, domestic demand and labour market developments in real time. Finally, the article discusses the main challenges faced by central banks when using non-standard data and methods and areas of further application to the work of central banks.
- JEL Code:
- C53,C55,E32
- 3 August 2021
-
Weekly financial statementAnnexes
- 3 August 2021
-
Weekly financial statement - Commentary
- 3 August 2021
-
Economic Bulletin - ArticleEconomic Bulletin Issue 5, 2021Details
- Abstract:
- This article looks at the government support for firms during the COVID-19 crisis in the form of subsidies, transfers, government guarantees and other forms of financing, such as loans at low interest rates and equity injections. It highlights that these government responses may substantially change the composition and dynamics of balance sheets. The article also discusses the implications of the responses for the size of government balance sheets. In addition, the phasing out of government support needs to be carefully aligned with economic and social objectives.
- JEL Code:
- D3,E21,E52
- 3 August 2021
-
Economic Bulletin - BoxEconomic Bulletin Issue 5, 2021Details
- Abstract:
- The recovery of growth in compensation per employee (CPE) has been V-shaped and driven mainly by adjustments in compensation and less by changes in employment. This can be explained by the decisive role played by job retention schemes during the pandemic, which helped to preserve the employment status of employees. The dispersion of CPE growth has remained higher than during pre-pandemic times – underlining the importance of taking sectoral developments into account when analysing aggregate wage growth in the euro area. The differences in sectoral developments in CPE growth reflect the different degrees to which sectors were affected by the pandemic and the measures taken to contain it. While wage growth has been strong in non-market services and construction in recent quarters, CPE growth was hardest hit and remains negative in high-contact services. The effects of the pandemic on growth in compensation are expected to shape wage developments in 2021 in all main sectors. As for the outlook, a key question is whether sectoral wage negotiations will aim to make up for the temporary cuts in compensation at least partly and in some sectors – which could add to wage growth over the next years, especially in those parts of the services sector that were hit hardest during the pandemic.
- JEL Code:
- H24,J30,J31
- 2 August 2021
-
Working Paper Series - Issue No. 2580Details
- Abstract:
- Dominant currency pricing (DCP) weakens the demand-side effects of exchange rate changes on exports (Gopinath et al., 2020). However, adjustment in the export sector can still occur through other supply-side channels. With bilateral trade data at the HS2-product level, panel fixed-effects regressions and an instrumental variables (IV) approach, this paper presents several novel findings: (1), a depreciation of an exporter’s currency against the US-dollar increases total export volumes between non-US countries, whereas bilateral exchange rates matter very little. (2), there is no statistically significant increase in average exports per firm (the intensive margin), while the aggregate export response is mainly driven by an increase in the number of exporting firms (the extensive margin). (3), there is substantial heterogeneity in the export response to exchange rates against dominant currencies. Market concentration, approximated by the Herfindahl-Hirschman Index (HHI), reduces the response of both the extensive and intensive margins to the US-dollar exchange rate. These results highlight an “export supply channel” of exchange rates in a world with dominant currencies, deepen our understanding of aggregate export adjustment and further underline the heterogeneous export response in different sectors to exchange rate changes.
- JEL Code:
- F14,F31,F41
- 2 August 2021
-
MFI interest rate statistics
- 2 August 2021
-
€STR Transparency on errors
- 2 August 2021
-
Economic Bulletin - BoxEconomic Bulletin Issue 5, 2021Details
- Abstract:
- The propensity of households to save has reached extraordinary levels since early 2020. This box analyses the drivers of this surge and tries to infer what they imply for private consumption as the pandemic is brought under control. On the one hand, the spike in household savings mostly comprises involuntary savings held to a large extent in the form of liquid assets, while the effects of the pandemic on household income have been limited. On the other hand, the additional savings are concentrated among older and higher-income households which, together with the services-led nature of the slump in consumption, suggests that these savings have only a limited potential to boost private consumption. Overall, the underlying drivers of the recent surge in household savings do not suggest much of an additional boost to the expected rebound in private consumption in the coming year.
- JEL Code:
- E21,E32
- 2 August 2021
-
Economic Bulletin - BoxEconomic Bulletin Issue 5, 2021Details
- Abstract:
- The coronavirus (COVID-19) pandemic has led to the accumulation of a large stock of household savings across advanced economies. Owing to their large size, the savings accumulated since early 2020 could significantly influence the post-pandemic recovery path. The central question is whether households will spend heavily once pandemic-related restrictions are lifted and consumer confidence returns, or whether other motives (e.g. precautionary, deleveraging) will keep households from spending their accumulated excess savings. This box reviews the main economic arguments supporting the hypothesis that any reduction in the accumulated stock of savings is likely to be limited in the medium term. However, given the considerable uncertainty surrounding these arguments, it also illustrates two alternative scenarios for the stock of the accumulated savings (a “cut-back” scenario and a “build-up” scenario) and assesses their possible implications for the global economic outlook.
- JEL Code:
- F32,F41
- 30 July 2021
-
Survey of Monetary Analysts - Aggregate results
- 30 July 2021
-
Working Paper Series - Issue No. 2579Details
- Abstract:
- We use a unique dataset of ratings for euro area corporate loans from commercial banks’ internal rating-based (IRBs) systems and central banks’ in-house credit assessment systems (ICASs) to investigate whether banks’ IRB ratings underestimate the credit risk of their corporate loan portfolios when the latter are used as collateral in the Eurosystem’s monetary policy operations. We are able to identify systematic risk underestimation by comparing the IRB ratings with those produced for the same borrowers by the ICASs. Our results show that while they are on average more conservative than ICASs for the entire population of rated corporate loans, IRBs are significantly less conservative than ICASs for those loans that are actually used as Eurosystem collateral, particularly for large loans. The less conservative estimates of risk by IRBs relative to ICASs can be partly explained by banks’ liquidity constraints, but not by their degree of capitalisation. Overall, our findings suggest the existence of a collateral-related channel through which the use of IRB ratings may influence the internal estimation of risk by banks.
- JEL Code:
- G21,G28
- 30 July 2021
-
Working Paper Series - Issue No. 2578Details
- Abstract:
- We study the macroeconomic effects of central bank digital currency (CBDC) in a dynamic general equilibrium model. Timing and information frictions create a need for inside (bank deposits) and outside money (CBDC) to finance production. To steer the quantity of CBDC, the central bank can set the lending and deposit rates for CBDC as well as collateral and quantity requirements. Less restrictive provision of CBDC reduces bank deposits. A positive interest spread on CBDC or stricter collateral or quantity constraints reduce welfare but can contain bank disintermediation, especially if the elasticity of substitution between bank deposits and CBDC is small.
- JEL Code:
- E58,E41,E42,E51,E52
- 29 July 2021
-
InterviewDetails
- Subtitle:
- Interview with Luis de Guindos, Vice-President of the ECB, conducted by Frank Wiebe and Jan Mallien
- 29 July 2021
-
Monetary policy account
- 29 July 2021
-
Working Paper Series - Issue No. 2577Details
- Abstract:
- We propose a dynamic clustering model for uncovering latent time-varying group structures in multivariate panel data. The model is dynamic in three ways. First, the cluster location and scale matrices are time-varying to track gradual changes in cluster characteristics over time. Second, all units can transition between clusters based on a Hidden Markov model (HMM). Finally, the HMM’s transition matrix can depend on lagged time-varying cluster distances as well as economic covariates. Monte Carlo experiments suggest that the units can be classified reliably in a variety of challenging settings. Incorporating dynamics in the cluster composition proves empirically important in an a study of 299 European banks between 2008Q1 and 2018Q2. We find that approximately 3% of banks transition per quarter on average. Transition probabilities are in part explained by differences in bank profitability, suggesting that low interest rates can lead to long-lasting changes in financial industry structure.
- JEL Code:
- G21,C33
- 29 July 2021
-
Occasional Paper Series - Issue No. 259Details
- Abstract:
- In the light of fears that the SARS-CoV-2 virus might be transmitted via cash – fears that were stoked by statements in the media and from public authorities – this paper aims to address the following issues: (1) to provide a descriptive account of the change in the circulation of euro banknotes and the use of cash in transactions during the pandemic; and (2) to assess the survivability of the virus on cash and the potential transmission risks. The pandemic has caused a significant increase in demand for cash as a store of value but a decrease in the use of cash in transactions. Although citizens reported using cash less in transactions partly out of fear of infection, research confirms that the risk of the virus being transmitted by banknotes and coins is very low. This supports the findings from the scientific community concluding that SARS-CoV-2 mainly spreads via respiratory fluids and airborne transmission, and that surfaces play a very minor role.
- JEL Code:
- I10,I12,E41,E58
- Network:
- Eurosystem Research Network on Cash (EURECA)
- 29 July 2021
-
InterviewDetails
- Subtitle:
- Interview with Fabio Panetta, Member of the Executive Board of the ECB, conducted by Federico Fubini
- 28 July 2021
- 28 July 2021
- 28 July 2021
- 28 July 2021
-
Working Paper Series - Issue No. 2576Details
- Abstract:
- Tight labour markets are usually accompanied by mounting wage pressures. Yet, in the past decade, wage growth has remained subdued despite the appearance of widespread labour shortages. This paper re-examines labour market conditions since 2007 through the lens of a novel indicator, relative labour shortages (RLS), based on data from a large representative business survey in Sweden. Four main results emerge from the analysis: (1), the time-series average of RLS suggested much weaker labour market conditions during the 2013–2019 recovery from the Great Recession and during the Covid-19 pandemic in 2020 than qualitative surveys or the vacancy-unemployment ratio. (2), the reason is that RLS contains a time-varying intensive margin of labour shortages not recorded in most surveys, which has been trending downwards since the Great Recession. (3), fixed-effects regressions with several aggregate-, sector, region and establishment-level controls confirm that RLS is strongly and positively correlated with annual wage growth at the establishment level. (4), sector-level wage Phillips curves show that the subdued level of RLS can help explain the sluggish wage growth in Sweden since the Great Recession.
- JEL Code:
- C80,E31,E60,J23,J31
- 28 July 2021
-
Euro area economic and financial developments by institutional sector (full)
- 28 July 2021
-
Research Bulletin - Issue No. 86Details
- Abstract:
- Climate change is one of the most pressing issues of our time. The challenge for policymakers is that climate policies could have a negative impact on the economy in the short term. In this article we discuss how this trade-off between fighting climate change and ensuring a stable business cycle affects the design of environmental policies. We argue in favour of a time-varying carbon tax that is increased during booms and decreased during recessions.
- JEL Code:
- Q58,G12,E32
- 27 July 2021
-
Weekly financial statementAnnexes
- 27 July 2021
-
Weekly financial statement - Commentary
- 27 July 2021
-
Working Paper Series - Issue No. 2575Details
- Abstract:
- Using micro price data underlying the Harmonized Index of Consumer Prices in France, Germany and Italy, we estimate relative price trends over the product life cycle and show that minimizing price and mark-up distortions in the presence of these trends requires targeting a significantly positive inflation target. Relative price trends shift the optimal inflation target up from a level of zero percent, as suggested by the standard sticky price literature, to a range of 1.1%- 2.1% in France, 1.2%-2.0% in Germany, 0.8%-1.0% in Italy, and 1.1-1.7% in the Euro Area (three country average). Differences across countries emerge due to systematic differences in the strength of relative price trends. Other considerations not taken into account in the present paper may push up the optimal inflation targets further. The welfare costs associated with targeting zero inflation turn out to be substantial and range between 2.1% and 4.5% of consumption in present-value terms.
- JEL Code:
- E31,E52
- Network:
- Price-setting Microdata Analysis Network (PRISMA)
- 27 July 2021
-
Working Paper Series - Issue No. 2574Details
- Abstract:
- The US dollar plays a dominant role in the invoicing of international trade, albeit not an exclusive one as more than half of global trade is invoiced in other currencies. Of particular interest are the euro, with a large role, and the renminbi, with a rising role. These two currencies are well suited to contrast the roles of economic fundamentals and policies, as European policy makers have taken a neutral stance in contrast to the promotion of the international role of the renminbi by the Chinese authorities. We assess the drivers of invoicing using the most recent and comprehensive data set for 115 countries over 1999-2019. We find that standard mechanisms that foster use of a large economy's currency predicted by theory – i.e. strategic complementarities in price setting and integration in cross-border value chains – underpin use of the dollar and the euro for trade with the United States and the euro area. These mechanisms also support the role of the dollar, but not the euro, in trade between non-US and non-euro area countries, making the dollar the globally dominant invoicing currency. Fundamentals and policies have played a contrasted role for the use of the renminbi. We find that China's integration into global trade has further strengthened the dominant status of the dollar at the expense of the euro. At the same time, the establishment of currency swap lines by the People's Bank of China has been associated with increases in renminbi invoicing, with an adverse effect on dollar use that is larger than for the euro.
- JEL Code:
- F14,F31,F44
- 27 July 2021
-
Monetary developments in the euro areaAnnexes
- 27 July 2021
-
Monetary developments in the euro area
- 27 July 2021
-
The ECB BlogDetails
- Subtitle:
- If we make the recovery fund work and if we embed the lessons from the pandemic in the EMU governance framework, we can emerge from the crisis with a stronger economy and greater social and political cohesion, says Executive Board member Fabio Panetta in The ECB Blog.
- 26 July 2021
-
Working Paper Series - Issue No. 2573Details
- Abstract:
- We study the interaction between monetary and fiscal policies in a Ramsey-Sidrauski model augmented with environmental capital. Equilibrium solutions are studied through the “Green Golden Rule”. Despite the non-separability of money in utility and intertemporally non-separable preferences, money is environmentally neutral. Policy impacts the environment via the marginal rate of transformation rather than the marginal rate of substitution between consumption and environment. Fiscal policies, lump sum and distortionary, under a balanced budget, are also environmentally non-neutral. Only under a non-balanced budget, when deficits are monetized, is money environmentally non-neutral. In alternative approaches (Cash-in-Advance, Transactions Costs), money is environmentally non-neutral.
- JEL Code:
- E52,E62,H23
- 26 July 2021
-
Working Paper Series - Issue No. 2572Details
- Abstract:
- The secular decline in the equilibrium real interest rate observed over the past decades has materially limited the room for policy-rate reductions in recessions, and has led to a marked increase in the incidence of episodes where policy rates are likely to be at, or near, the effective lower bound on nominal interest rates. Using the ECB's New Area-Wide Model, we show that, if unaddressed, the effective lower bound can cause substantial costs in terms of worsened macroeconomic performance, as reflected in negative biases in inflation and economic activity, as well as heightened macroeconomic volatility. These costs can be mitigated by the use of nonstandard instruments, notably the joint use of interest-rate forward guidance and large-scale asset purchases. When considering alternatives to inflation targeting, we find that make-up strategies such as price-level targeting and average-inflation targeting can, if they are well-understood by the private sector, largely undo the negative biases and heightened volatility induced by the effective lower bound.
- JEL Code:
- E31,E32,E37,E52,E58
- 26 July 2021
-
Macroprudential Bulletin - Article - Issue No. 14Details
- Abstract:
- This article assesses the economic costs and benefits of the Basel III finalisation package for the euro area and shows that the transitory costs of the reform are outweighed by its permanent long-term benefits. Implementing EU-specific modifications to the Basel III reform, such as the small and medium-sized enterprise (SME) supporting factor, credit valuation adjustment (CVA) exemptions and discretion with regard to the operational risk capital charge, reduce the already moderate transitory costs of the reform, although they also reduce its long-run benefits. Approaches that, in addition, modify the implementation of the output floor fail to further reduce the short-term economic costs of the reform while again decreasing its long-term benefits.
- JEL Code:
- G21,G28
- 23 July 2021
- 23 July 2021
-
Governing Council decisions - Other decisions
- 23 July 2021
-
Press releaseAnnexes
- 23 July 2021
-
Other publication
- 23 July 2021
- 23 July 2021
- 23 July 2021
-
Occasional Paper Series - Issue No. 258Details
- Abstract:
- This paper assesses the macroeconomic implications of the Basel III finalisation for the euro area, employing a large-scale semi-structural model encompassing over 90 banks and 19-euro area economies. The new regulatory framework will influence banks’ reactions to economic conditions and, as a result, affect the ability of the banking system to amplify or dampen economic shocks. The assessment covers the entire distribution of conditional economic predictions to measure the cost and benefit of the reforms. Looking at the means of conditional forecasts of output growth provides an indication of the costs of the reform, namely a transitory reduction in euro area gross domestic product (GDP) and in lending to the non-financial private sector. Looking at the lower percentile of output growth forecasts, i.e. growth at risk, captures the long-term benefits of the Basel III finalisation package in terms of improved resilience and the ability of the banking system to supply lending to the real economy under adverse conditions. These permanent growth-at-risk benefits ultimately outweigh the short-term costs of the reform.
- JEL Code:
- E37,E58,G21,G28
- 23 July 2021
-
Payment instruments and systemsAnnexes
- 23 July 2021
-
Payment instruments and systems
- 23 July 2021
-
Press releaseRelated
- 22 July 2021
-
Survey of Professional Forecasters
- 23 July 2021
-
Economic Bulletin - BoxEconomic Bulletin Issue 5, 2021Details
- Abstract:
- This box summarises the main findings from contacts between ECB staff and representatives of 63 leading non-financial companies operating in the euro area. The exchanges took place between 28 June and 7 July 2021. According to these contacts, overall activity was growing strongly in the second quarter of 2021 and this was expected to continue in the third quarter, reflecting the gradual easing of lockdowns and travel restrictions, which benefited services, and the continued strong demand for manufactured goods. At the same time, shortages of inputs and transport bottlenecks were limiting activity somewhat in the manufacturing sector and generating pipeline pressures, some of which would feed through to final consumer prices and wages. These pressures should gradually ease over the next 6-18 months.
- JEL Code:
- E2,E3,L2
- 22 July 2021
-
Survey of Professional ForecastersAnnexes
- 23 July 2021
-
Survey of Professional Forecasters
Related- 23 July 2021
- 22 July 2021
-
Monetary policy statementDetails
- Subtitle:
- Christine Lagarde, President of the ECB,
Luis de Guindos, Vice-President of the ECB
- 22 July 2021
-
Monetary policy decision
- 21 July 2021
- 20 July 2021
-
Weekly financial statementAnnexes
- 20 July 2021
-
Weekly financial statement - Commentary
- 20 July 2021
-
Euro area bank lending survey - Issue No. 2021Annexes
- 20 July 2021
-
Euro area bank lending survey - Annex
Related- 20 July 2021
-
Press release
- 20 July 2021
-
Balance of payments (monthly)
- 20 July 2021
-
Press releaseRelated
- 20 July 2021
-
Euro area bank lending survey - Issue No. 2021
- 14 July 2021
-
SpeechDetails
- Subtitle:
- Speech by Isabel Schnabel, Member of the Executive Board of the ECB, at the virtual Financial Statements series hosted by the Peterson Institute for International Economics
Annexes- 14 July 2021
-
Speech
- 14 July 2021
- 14 July 2021
-
Press release
- 14 July 2021
-
The ECB BlogDetails
- Subtitle:
- We have decided to launch a project to prepare for possibly issuing a digital euro. A digital euro will be successful if it adds value for people, merchants and financial intermediaries in the euro area, explains Executive Board member Fabio Panetta in The ECB Blog.
Related- 30 November 2022
-
The ECB Blog
- 13 July 2022
-
The ECB Blog
- 19 November 2021
-
The ECB Blog
- 25 March 2021
- 2 December 2020
-
The ECB Blog
- 2 October 2020
-
The ECB Blog
- 14 July 2021
-
Other publication
- 13 July 2021
-
Weekly financial statementAnnexes
- 13 July 2021
-
Weekly financial statement - Commentary
- 13 July 2021
-
Press releaseRelated
- 13 July 2021
-
Survey on credit terms and conditions in euro-denominated securities financing and OTC derivatives marketsAnnexes
- 13 July 2021
-
Other publication
- 13 July 2021
- 13 July 2021
-
InterviewDetails
- Subtitle:
- Interview with Christine Lagarde, President of the ECB, conducted by Martin Arnold on 11 July 2021
- 12 July 2021
-
Euro area securities issues statisticsAnnexes
- 12 July 2021
-
Euro area securities issues statistics
- 12 July 2021
-
Euro area securities issues statistics
- 11 July 2021
-
SpeechDetails
- Subtitle:
- Speech by Christine Lagarde, President of the ECB, at the International Climate Change Conference in Venice
- 10 July 2021
-
InterviewDetails
- Subtitle:
- Interview with Isabel Schnabel, Member of the Executive Board of the ECB, conducted by Patrick Bernau and Dennis Kremer on 8 July and published on 10 July 2021
- 9 July 2021
-
Monetary policy account
- 8 July 2021
-
Strategy review
- 8 July 2021
-
Monetary policy statementDetails
- Subtitle:
- Christine Lagarde, President of the ECB,
Luis de Guindos, Vice-President of the ECB
- 8 July 2021
-
Press releaseAnnexes
- 8 July 2021
- 8 July 2021
- 8 July 2021
-
Strategy review
- 7 July 2021
-
Weekly financial statementAnnexes
- 7 July 2021
-
Weekly financial statement - Commentary
- 7 July 2021
- 6 July 2021
-
Euro money market statistics
- 5 July 2021
-
Euro area economic and financial developments by institutional sector (early)
- 5 July 2021
-
Survey of Monetary Analysts
- 5 July 2021
-
Balance of payments (quarterly)
- 5 July 2021
-
MFI interest rate statistics
- 3 July 2021
-
SpeechDetails
- Subtitle:
- Speech by Isabel Schnabel, Member of the Executive Board of the ECB, at the Petersberger Sommerdialog
Annexes- 3 July 2021
-
Speech
- 2 July 2021
-
InterviewDetails
- Subtitle:
- Interview with Christine Lagarde, President of the ECB, conducted by Marie Cécile Berenger
- 1 July 2021
-
Other publication - Issue No. 2021Annexes
- 30 June 2021
- 1 July 2021
- 30 June 2021
- 29 June 2021
-
SpeechDetails
- Subtitle:
- Speech by Christine Lagarde, President of the ECB, at the Brussels Economic Forum 2021
- 29 June 2021
-
Weekly financial statementAnnexes
- 29 June 2021
-
Weekly financial statement - Commentary
- 28 June 2021
-
SpeechDetails
- Subtitle:
- Speech by Luis de Guindos, Vice-President of the ECB, at the Frankfurt Euro Finance Summit
- 28 June 2021
-
SpeechDetails
- Subtitle:
- Keynote speech by Fabio Panetta, Member of the Executive Board of the ECB, at the Conference of the Governors of Mediterranean Central Banks on “Central banks at the frontline of the COVID-19 crisis: weathering the storm, spurring the recovery”
- 28 June 2021
-
Macroprudential Bulletin - Article - Issue No. 13Details
- Abstract:
- This contribution reviews historical drivers of bank dividend payouts in the euro area. Economic literature presents three main reasons for adjustments to dividend payouts: asymmetric information between shareholders and management, the presence of agency costs, and regulatory constraints. Using a panel data approach, the article finds evidence supporting all three hypotheses. Banks lower dividends after facing a decline in profits and capital, but counterfactual simulations show that this adjustment could be small. Regulatory restrictions may therefore be warranted in the event of large expected losses or heavy uncertainty.
- JEL Code:
- G21,G35
- 28 June 2021
-
Macroprudential Bulletin - Article - Issue No. 13Details
- Abstract:
- This article evaluates the impact on euro area bank valuations of the March 2020 European Central Bank (ECB) recommendation not to pay dividends or buy back shares. The analysis provides evidence of a negative impact on bank valuations in the order of magnitude of 7%. That impact is not, however, homogenous across banks: institutions that pay out dividends but fail to generate returns commensurate with investor requirements are found to be more strongly affected than those generating shareholder value or banks that are too weak to pay out dividends even in the absence of dividend restrictions. Further, the analysis suggests that uncertainty over future distributions arising from the SSM recommendation, rather than the suspension of dividends per se, explains most of the negative impact on bank valuations. By construction, this analysis captures the side effects of the measure, notwithstanding its overall merit in preserving bank capital and sustaining bank intermediation capacity during the COVID-19 period.
- JEL Code:
- G21,G28,C31
- 28 June 2021
-
Macroprudential Bulletin - Article - Issue No. 13Details
- Abstract:
- This article studies the impact of the ECB’s dividend recommendations on banks’ lending and loss-absorption capacity during the COVID-19 crisis. It finds that the policy has been effective in mitigating the potential procyclical adjustment of banks. Banks that did not distribute previously planned dividends increased their lending by around 2.4% and their provisions by approximately 5.5%, thus strengthening their capacity to absorb losses. Notably, the recommendations appear to have mitigated the procyclical behaviour of banks closer to the threshold for automatic restrictions on distributions. Overall, the recommendations were successful in conserving capital and helping the banking system support the real economy and facilitate the recognition of future losses.
- JEL Code:
- E51,E58,G21,G35,G28
- 28 June 2021
-
Macroprudential Bulletin - Article - Issue No. 13Details
- Abstract:
- This article provides an overview of the actions aimed at reducing or suspending banks’ distributions on a system-wide basis. It finds that such measures imply a number of pros and cons which deserve further analysis. On the one hand, system-wide restrictions on distributions complement and enhance the effectiveness of other public support measures, including prudential relief measures, by ensuring that the “freed-up” capital is used for the purposes of supporting the real economy and absorbing losses. Furthermore, system-wide measures simultaneously address adverse incentives to deleverage by removing the stigma effects associated with institution-specific restrictions. On the other hand, the implementation of system-wide restrictions on distributions presents several concomitant drawbacks and challenges. In particular, investors may be reluctant to invest in banks which are subject to restrictions, which may hamper banks ’ability to raise capital in the longer term. Other challenges include interference with the smooth functioning of the internal market and the possibility of the measures becoming less effective over time when introduced via soft-law instruments.
- JEL Code:
- G21,G28,G35
- 28 June 2021
-
Press release
- 25 June 2021
-
Governing Council decisions - Other decisions
- 25 June 2021
-
Monetary developments in the euro areaAnnexes
- 25 June 2021
-
Monetary developments in the euro area
- 24 June 2021
-
SpeechDetails
- Subtitle:
- Guest lecture by Isabel Schnabel, Member of the Executive Board of the ECB, at the School of Economics and Management, University of Cyprus
- 24 June 2021
- 24 June 2021
-
Economic Bulletin
- 24 June 2021
-
Economic Bulletin - BoxEconomic Bulletin Issue 4, 2021Details
- Abstract:
- This box describes the ECB’s monetary policy operations during the first and second maintenance periods of 2021, from 27 January to 27 April.
- JEL Code:
- E40,E52,E58
- 24 June 2021
-
Economic Bulletin - BoxEconomic Bulletin Issue 4, 2021Details
- Abstract:
- This box documents the misalignment between the surge in global demand for semiconductors and their limited global supply. The semiconductor chip shortage poses constraints on euro area manufacturers, particularly in industries relying on semiconductors, such as the computer, electronic, electrical equipment and automotive industries. So far, there is only limited evidence regarding the effects of the shortage of semiconductors on euro area price pressures.
- JEL Code:
- F10,D24,E23,E31
- 24 June 2021
-
Economic Bulletin - BoxEconomic Bulletin Issue 4, 2021Details
- Abstract:
- This box examines the fiscal policy developments outlined in the 2021 stability programmes.
- JEL Code:
- E62,H6
- 24 June 2021
-
Research Bulletin - Issue No. 85Details
- Abstract:
- A low-inflation trap is a situation where both actual and expected inflation are firmly below the central bank’s target and nominal interest rates are close to or at their lower bound. The concept is often used to characterise Japan’s quarter-century of very low, and often negative, inflation. More recently, persistent inflation shortfalls across the industrialised world have raised concerns that other jurisdictions, too, may be on the verge of getting caught in a Japanese-style low-inflation trap. Our new research shows how fiscal policy can help guard economies against this fate.
- JEL Code:
- E52,E61,E62
- 23 June 2021
-
Economic Bulletin - BoxEconomic Bulletin Issue 4, 2021Details
- Abstract:
- European governments responded to the pandemic by deploying large fiscal packages with the aim of supporting households, workers and firms. The October 2020-March 2021 SAFE shows that around two-thirds of large firms and SMEs surveyed made use of government policy support measures. Most firms used these schemes, particularly in the form of wage support measures, tax cuts and tax moratoria, to cover their immediate and short-term liquidity needs. Firms also indicated that government measures either currently in place or planned would make it easier for them to meet their debt obligations in the next two years. This demonstrates how government policies have been key to easing the liquidity needs of firms in the short and medium term following the outbreak of the pandemic.
- JEL Code:
- D22,H32
- 23 June 2021
-
Economic Bulletin - BoxEconomic Bulletin Issue 4, 2021Details
- Abstract:
- This box documents the impact of the coronavirus (COVID-19) crisis on the euro area labour market for men and women. Based on available data up to the end of 2020, the COVID-19 crisis led to a decline in the labour force, a fall in employment and an increase in unemployment, with different developments for men and women across time. Preliminary evidence suggests that workers from both genders benefited from the widespread use of job retention schemes. Still, the decline in average hours worked was somewhat more pronounced for men than for women. The reasons behind the decline in average hours worked differed across gender, with the decline in average hours worked for men driven in part by a decrease in contractual hours and for both men and women by ad hoc reductions in hours worked. This, in turn, increased the gap between the actual hours worked and the contractual hours of work. These developments can also be attributed to the asymmetric sectoral impact of the COVID-19 crisis. Overall, the available evidence suggests that both men and women were strongly affected by the impact of the COVID-19 crisis on the euro area labour market.
- JEL Code:
- E24,J11,J16,J21
- 22 June 2021
-
SpeechDetails
- Subtitle:
- Vortrag von Isabel Schnabel, Mitglied des Direktoriums der EZB, beim Rotary Club (Bonn-Museumsmeile)
- 22 June 2021
-
SpeechDetails
- Subtitle:
- Lecture by Philip R. Lane, Member of the Executive Board of the ECB, at the Athens University of Economic and Business
- 22 June 2021
-
Weekly financial statementAnnexes
- 22 June 2021
-
Weekly financial statement - Commentary
- 22 June 2021
-
Working Paper Series - Issue No. 2571Details
- Abstract:
- Labor productivity is more procyclical in OECD countries with lower employment volatility. To capture this new stylized fact, we propose a business cycle model with employment adjustment costs, variable hours and labor effort. We show that, in our model with variable effort, greater labor market frictions are associated with procyclical labor productivity as well as stable employment. In contrast, the constant-effort model fails to replicate the observed cross-country pattern in the data. By implication, labor market deregulation has a greater effect on the cyclicality of labor productivity and on the relative volatility of employment when effort can vary.
- JEL Code:
- E30,E50,E60
- 22 June 2021
-
Economic Bulletin - ArticleEconomic Bulletin Issue 4, 2021Details
- Abstract:
- The globalisation of inflation hypothesis argues that the factors influencing inflation dynamics are becoming increasingly global. The interest in the global determinants of inflation stems from the observed co-movement of inflation rates across advanced economies (AEs) amid the growing internationalisation of goods, services and financial markets. This article reviews recent inflation developments across AEs and the channels through which globalisation can feed into the more persistent component of inflation. The article finds that three elements of globalisation appear to be linked to a lower persistent inflation: trade integration, informational globalisation and global value chain participation. However, available estimates suggest that this effect is economically small, and the article concludes that globalisation does not appear to be a key determinant of the synchronisation and decline in inflation rates observed across AEs. Looking ahead a reversal (or further slowdown) of globalisation trends could provide only limited tailwinds for inflation trends.
- JEL Code:
- E31,E42,E50,F36,F40,F60
- 21 June 2021
-
SpeechDetails
- Subtitle:
- Introductory statement by Christine Lagarde, President of the ECB, at the Hearing of the Committee on Economic and Monetary Affairs of the European Parliament (by videoconference)
Annexes- 21 June 2021
-
Speech
- 21 June 2021
- 21 June 2021
- 21 June 2021
-
Working Paper Series - Issue No. 2570Details
- Abstract:
- We review the recent literature on rational inattention, identify the main theoretical mechanisms, and explain how it helps us understand a variety of phenomena across fields of economics. The theory of rational inattention assumes that agents cannot process all available information, but they can choose which exact pieces of information to attend to. Several important results in economics have been built around imperfect information. Nowadays, many more forms of information than ever before are available due to new technologies, and yet we are able to digest little of it. Which form of imperfect information we possess and act upon is thus largely determined by which information we choose to pay attention to. These choices are driven by current economic conditions and imply behavior that features numerous empirically supported departures from standard models. Combining these insights about human limitations with the optimizing approach of neoclassical economics yields a new, generally applicable model.
- JEL Code:
- D8
- 21 June 2021
-
Working Paper Series - Issue No. 2569Details
- Abstract:
- Whether Federal Reserve Bank presidents have the right to vote on the U.S. monetary policy committee depends on a mechanical, yearly rotation scheme. Rotation is without exclusion: also nonvoting presidents attend and participate in the meetings of the committee. Does voting status change behavior? We find that the data go against the hypothesis that without the voting right, presidents use their public speeches and their meeting interventions to compensate for the loss of formal influence; rather, they support the hypothesis that the voting right makes presidents more involved. We also find that speeches move financial markets less in years that presidents vote. We argue that these discounts are consistent with their communication behavior.
- JEL Code:
- D71,D72,E58
- 21 June 2021
-
Euro area pension fund statisticsAnnexes
- 21 June 2021
-
Euro area pension fund statistics
- 21 June 2021
-
Economic Bulletin - BoxEconomic Bulletin Issue 4, 2021Details
- Abstract:
- Amid elevated volatility in economic activity and international trade due to the pandemic, the overall euro area current account surplus narrowed only slightly in 2020 compared with 2019, from 2.3% to 2.2% of GDP. However, external transactions in the current account contracted sharply during the first half of the year, following the outbreak of the pandemic and the introduction of measures to contain its spread. The economic repercussions of the pandemic were particularly visible in the trade in services balance, where travel restrictions led to a sharp reduction in the euro area surplus on travel services.
- JEL Code:
- F32,F41
- 21 June 2021
-
Economic Bulletin - BoxEconomic Bulletin Issue 4, 2021Details
- Abstract:
- During the pandemic, euro area house price dynamics remained robust, notwithstanding a general deterioration in macroeconomic conditions. The pandemic has caused the number of housing transactions to fall, triggering a quantity adjustment rather than a price adjustment. Favourable financing conditions and fiscal policies are supporting household income and have cushioned negative effects on house prices. Moreover, weak construction activity since the start of the pandemic has weighed on supply, possibly adding to upward price pressures on existing housing. The observed resilience of euro area house prices appears to be broad-based and not limited to developments in capital cities in the euro area.
- JEL Code:
- E31
- 20 June 2021
- 20 June 2021
-
InterviewDetails
- Subtitle:
- Interview with Fabio Panetta, Member of the Executive Board of the ECB, conducted by Martin Arnold on 14 June 2021
- 18 June 2021
-
Survey of Monetary Analysts - Aggregate results
- 18 June 2021
- 18 June 2021
-
Working Paper Series - Issue No. 2568Details
- Abstract:
- In this paper we explore the cross-country implications of climate-related mitigation policies. Specifically, we set up a two-country, two-sector (brown vs green) DSGE model with negative production externalities stemming from carbon-dioxide emissions. We estimate the model using US and euro area data and we characterize welfare-enhancing equilibria under alternative containment policies. Three main policy implications emerge: i) fiscal policy should focus on reducing emissions by levying taxes on polluting production activities; ii) monetary policy should look through environmental objectives while standing ready to support the economy when the costs of the environmental transition materialize; iii) international cooperation is crucial to obtain a Pareto improvement under the proposed policies. We finally find that the objective of reducing emissions by 50%, which is compatible with the Paris agreement's goal of limiting global warming to below 2 degrees Celsius with respect to pre-industrial levels, would not be attainable in absence of international cooperation even with the support of monetary policy.
- JEL Code:
- F42,E50,E60,F30
- 18 June 2021
-
Working Paper Series - Issue No. 2567Details
- Abstract:
- Borrower-based macroprudential (MP) policies - such as caps on loan-to-value (LTV) ratios and debt-service-to-income (DSTI) limits - contain the build-up of systemic risk by reducing the probability and conditional impact of a crisis. While LTV/DSTI limits can increase inequality at introduction, they can dampen the increase in inequality under adverse macroeconomic conditions. The relative size of these opposing effects is an empirical question. We conduct counterfactual simulations under different macroeconomic and macroprudential policy scenarios using granular income and wealth data from the Households Finance and Consumption Survey (HFCS) for Ireland, Italy, Netherlands and Portugal. Simulation results show that borrower-based measures have a moderate negative welfare impact in terms of wealth inequality and a negligible impact on income inequality.
- JEL Code:
- G21,G28,G51
- 18 June 2021
-
Balance of payments (monthly)
- 18 June 2021
-
T2S financial statement
- 17 June 2021
-
InterviewDetails
- Subtitle:
- Interview with Philip R. Lane, Member of the Executive Board of the ECB, conducted by Paul Gordon on 17 June 2021
- 16 June 2021
-
SpeechDetails
- Subtitle:
- Keynote speech by Frank Elderson, Member of the Executive Board of the ECB and Vice-Chair of the Supervisory Board of the ECB, at the ECB-EBRD joint conference on “Emerging climate-related risk supervision and implications for financial institutions”
- 15 June 2021
-
SpeechDetails
- Subtitle:
- Keynote speech by Fabio Panetta, Member of the Executive Board of the ECB, at the Deutsche Bundesbank’s 5th International Cash Conference – “Cash in times of turmoil”
- 15 June 2021
-
Weekly financial statementAnnexes
- 15 June 2021
-
Weekly financial statement - Commentary
- 14 June 2021
-
SpeechDetails
- Subtitle:
- Welcome address by Isabel Schnabel, Member of the Executive Board of the ECB, at the ECB DG-Research Symposium “Climate change, financial markets and green growth”
- 14 June 2021
-
Working Paper Series - Issue No. 2566Details
- Abstract:
- We use microdata to estimate the strength of price selection { a key metric for the effect of monetary policy on the real economy. We propose a product-level proxy for mispricing and assess whether products with larger mispricing respond with a higher probability to identified monetary and credit shocks. We find that they do not, suggesting selection is absent. Instead, we detect state-dependent adjustment on the gross extensive margin. Our results are broadly consistent with second-generation state-dependent pricing models and sizable effects of monetary policy on the real economy.
- JEL Code:
- E31,E32,E52
- 14 June 2021
-
InterviewDetails
- Subtitle:
- Interview with Christine Lagarde, President of the ECB, conducted by Johanna Treeck and Florian Eder on 11 June 2021 in Frankfurt
- 11 June 2021
-
Euro area securities issues statisticsAnnexes
- 11 June 2021
-
Euro area securities issues statistics
- 11 June 2021
-
Euro area securities issues statistics
- 10 June 2021
-
Macroeconomic projections for the euro areaAnnexes
- 10 June 2021
-
Monetary policy statementDetails
- Subtitle:
- Christine Lagarde, President of the ECB,
Luis de Guindos, Vice-President of the ECB
- 10 June 2021
-
Monetary policy decision
- 8 June 2021
-
Weekly financial statementAnnexes
- 8 June 2021
-
Weekly financial statement - Commentary
- 7 June 2021
-
MFI interest rate statistics
- 3 June 2021
-
SpeechDetails
- Subtitle:
- Speech by Frank Elderson, Chair of the Central Banks and Supervisors Network for Greening the Financial System, Member of the Executive Board and Vice-Chair of the Supervisory Board of the ECB, at The Green Swan Conference – Coordinating finance on climate
- 2 June 2021
-
SpeechDetails
- Subtitle:
- Speech by Christine Lagarde, President of the ECB, on the occasion of the awarding of the Prix Turgot 2021, Paris
- 2 June 2021
-
The international role of the euro - Issue No. 2021Annexes
- 2 June 2021
-
The international role of the euro
- 2 June 2021
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The international role of the euro - Special featureThe international role of the euro 2021Details
- 2 June 2021
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The international role of the euro - Special featureThe international role of the euro 2021Details
- 2 June 2021
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The international role of the euro - Special featureThe international role of the euro 2021Details
- 2 June 2021
-
The international role of the euro - BoxThe international role of the euro 2021Details
- 2 June 2021
-
The international role of the euro - BoxThe international role of the euro 2021Details
- 2 June 2021
-
The international role of the euro - BoxThe international role of the euro 2021Details
- 2 June 2021
-
The international role of the euro - BoxThe international role of the euro 2021Details
- 2 June 2021
-
The international role of the euro - BoxThe international role of the euro 2021Details
- 2 June 2021
-
The international role of the euro - BoxThe international role of the euro 2021Details
- 2 June 2021
-
The international role of the euro - BoxThe international role of the euro 2021Details
- 2 June 2021
-
The international role of the euro - BoxThe international role of the euro 2021Details
- 2 June 2021
-
The international role of the euro - BoxThe international role of the euro 2021Details
- 2 June 2021
-
Press release
- 2 June 2021
-
Working Paper Series - Issue No. 2565Details
- Abstract:
- Macro-prudential authorities need to assess medium-term downside risks to the real economy, caused by severe financial shocks. Before activating policy measures, they also need to consider their short-term negative impact. This gives rise to a risk management problem, an inter-temporal trade-off between expected growth and downside risk. Predictive distributions are estimated with structural quantile vector autoregressive models that relate economic growth to measures of financial stress and the financial cycle. An empirical study with euro area and U.S. data shows how to construct indicators of macro-prudential policy stance and to assess when interventions may be beneficial.
- JEL Code:
- G21,C33
- Network:
- Research Task Force (RTF)
- 2 June 2021
-
Euro area insurance corporations statisticsAnnexes
- 2 June 2021
-
Euro area insurance corporations statistics
- 1 June 2021
-
Weekly financial statementAnnexes
- 1 June 2021
-
Weekly financial statement - Commentary
- 1 June 2021
-
Working Paper Series - Issue No. 2564Details
- Abstract:
- This paper provides new empirical evidence that bears on the efficacy of unconventional monetary policies when the main policy rate is negative. When a negative interest rate policy (NIRP) is deployed in concert with rate forward guidance (FG) and quantitative easing (QE), the identification of the impacts of these unconventional instruments of monetary policy is challenging. We propose a novel identification approach that seeks to overcome this challenge by combining a dense, controlled event study with forward curve counterfactuals that we construct using predictive rate densities derived from rate options. We find that NIRP has exerted a sizeable influence on the term structure of interest rates throughout maturities while, on net, the impact of rate FG has been more muted. QE explains the lion’s share of yield effects, particularly over the back end of the yield curve. We then feed these rate counterfactuals into a large-scale Bayesian VAR and generate alternative histories for the euro area macro-economy that one would likely have observed between 2013 and 2020 in no-NIRP (with or without FG) and in no-QE regimes. According to this conditional forecasting exercise, in 2019 GDP growth and annual inflation would have been 1.1 p.p. and 0.75 p.p. lower, respectively, and the unemployment rate 1.1 p.p. higher than they actually were, had the ECB abstained from using NIRP, FG and QE over the previous six years or so.
- JEL Code:
- C32,C54,C58,E50,E51,E52
- 1 June 2021
-
Working Paper Series - Issue No. 2563Details
- Abstract:
- By focusing on the cost conditions at issuance, I find that not only the Covid-19 pandemic effects were different across bonds and firms at different stages, but also that the market composition was significantly affected, collapsing on investment-grade bonds, a segment in which the share of bonds eligible to the ECB corporate programmes strikingly increased from 15% to 40%. Contemporaneously, the high-yield segment shrunk to almost disappear at 4%. Another source of risk detected in the pricing mechanism is the weak resilience to pandemic: the premium requested is around 30 bp and started to be priced only after the early containment actions taken by the national authorities. On the contrary, I do not find evidence supporting an increased risk for corporations headquartered in countries with a reduced fiscal space, nor the existence of a premium in favour of green bonds, which should be the backbone of a possible “green recovery”.
- JEL Code:
- G15,G32,E52
- 1 June 2021
-
Survey on the Access to Finance of Enterprises in the euro areaAnnexes
- 1 June 2021
-
SAFE questionnaire
- 1 June 2021
-
Press releaseRelated
- 1 June 2021
-
Survey on the Access to Finance of Enterprises in the euro area
- 31 May 2021
-
Working Paper Series - Issue No. 2562Details
- Abstract:
- Inflation targeting is implemented in different ways – most often by adopting point targets, by having tolerance bands around a point target, or by specifying target ranges. Using data for 20 economies, this paper tests whether the various target types affect the anchoring of inflation expectations at shorter horizons differently. It tests two contradictory hypotheses, namely that targets with intervals lead to (i) less anchoring, e.g. because they provide more flexibility to the central bank, or (ii) better anchoring, because they are missed less often, leading to an enhanced credibility. The evidence refutes the first hypothesis, and generally finds that target ranges or (in some cases) tolerance bands outperform the other types. However, the effects partially depend on the economic context and no target type consistently outperforms all others. This suggests that there are some benefits to adopting intervals, but the central bank can anchor inflation expectations also by other means.
- JEL Code:
- E52,E58,E31
- 31 May 2021
-
Working Paper Series - Issue No. 2561Details
- Abstract:
- We decompose euro area sovereign bond yields into five distinct components: i) expected future short-term risk-free rates and a term premium, ii) default risk premium, iii) redenomination risk premium, iv) liquidity risk premium, and a v) segmentation (convenience) premium. Identification is achieved by considering sovereign bond yields jointly with other rates, including sovereign credit default swap spreads with and without redenomination as a credit event feature. We apply our framework to study the impact of European Central Bank (ECB) monetary policy and European Union (E.U.) fiscal policy announcements during the Covid-19 pandemic recession. We find that both monetary and fiscal policy announcements had a pronounced effect on yields, mostly through default, redenomination, and segmentation premia. While the ECB's unconventional monetary policy announcements benefited some (vulnerable) countries more than others, owing to unprecedented flexibility in implementing bond purchases, the E.U.’s fiscal policy announcements lowered yields more uniformly.
- JEL Code:
- C22,G11
- Network:
- Research Task Force (RTF)
- 31 May 2021
-
Monetary developments in the euro areaAnnexes
- 31 May 2021
-
Monetary developments in the euro area
- 31 May 2021
-
Research Bulletin - Issue No. 84Details
- Abstract:
- The coronavirus (COVID-19) pandemic has generated a complex economic shock that has affected households across the euro area very differently. In studying the impact of this shock on household consumption and the implications for the economic outlook it is critical to understand and factor in these large divergences. In this article, we use rich data from the Consumer Expectations Survey, a new ECB household survey that interviews around 10,000 households across the six largest euro area economies on a monthly basis. We document substantial divergences in pandemic-induced financial concerns of households across population subgroups and countries, with financial concerns being significantly higher for younger, female, and low-income individuals in countries where the first wave of COVID-19 was more severe. Also, we show how these concerns can account to a large extent for the drop in aggregate household spending in 2020. Reflecting this heterogeneity, our results imply that fiscal measures will be most effective in stabilising aggregate consumption and supporting economic recovery if they target the most vulnerable groups with the greatest financial concerns.
- JEL Code:
- D12,D81,E21,G51,H31
- 28 May 2021
- 28 May 2021
- 28 May 2021
- 28 May 2021
- 28 May 2021
- 28 May 2021
- 28 May 2021
- 28 May 2021
- 28 May 2021
- 28 May 2021
-
Working Paper Series - Issue No. 2560Details
- Abstract:
- Financial asset prices contain a rich set of real-time information on the economy. To extract this information, it is crucial to understand the driving factors behind financial market developments. In this paper, we exploit daily cross-asset price movements in a sign-restricted BVAR model to analyse the extent to which euro area and US yields, equity prices, and the euro-US dollar exchange rate are jointly driven by monetary policy, macro and global risk factors. A novelty is that we allow for cross-Atlantic spillovers while also accounting for the unique role of the US in the global financial system. Our results underline the importance of US spillovers and shifts in global risk sentiment for understanding the dynamics of euro area financial variables. Euro area shocks transmit much less to US financial markets in comparison, with global risk shocks being more important instead. Using the daily shocks as instruments in a Proxy-SVAR, we demonstrate that the transmission of financial market movements to the macroeconomy depends on the underlying driver, thereby illustrating why it matters to look into the driving factors in the first place.
- JEL Code:
- C32,C54,E44,E52
- 28 May 2021
-
Working Paper Series - Issue No. 2559Details
- Abstract:
- Since the global financial crises, many countries have implemented macroprudential policies with the aim to render the financial system more resilient to shocks and limit the procyclicality of the financial system. We present theoretical and empirical evidence on the effectiveness of macroprudential policy, on both, financial stability and economic growth focussing on capital measures and borrower-based measures.
- JEL Code:
- G21
- Network:
- Discussion papers
- 28 May 2021
-
TARGET Annual Report - Issue No. 2020
- 28 May 2021
-
Discussion Paper Series - Issue No. 15Details
- Abstract:
- Since the global financial crises, many countries have implemented macroprudential policies with the aim to render the financial system more resilient to shocks and limit the procyclicality of the financial system. We present theoretical and empirical evidence on the effectiveness of macroprudential policy, on both, financial stability and economic growth focussing on capital measures and borrower-based measures.
- JEL Code:
- G21
- 28 May 2021
-
InterviewDetails
- Subtitle:
- Interview with Isabel Schnabel, Member of the Executive Board of the ECB, conducted by Balazs Koranyi, Frank Siebelt and Francesco Canepa
- 27 May 2021
-
SpeechDetails
- Subtitle:
- Keynote speech by Isabel Schnabel, Member of the Executive Board of the ECB, at the “VIII. New Paradigm Workshop”, organised by the Forum New Economy
Annexes- 27 May 2021
-
Speech
- 27 May 2021
-
SpeechDetails
- Subtitle:
- Keynote speech by Luis de Guindos, Vice-President of the ECB, at the joint ECB and European Commission conference on “European Financial Integration and Stability”
- 27 May 2021
-
Euro area quarterly financial accounts - Quality report - Issue No. 2021Annexes
- 27 May 2021
-
Euro area quarterly financial accounts - Quality report
- 26 May 2021
-
Press releaseAnnexes
- 26 May 2021
- 26 May 2021
-
Working Paper Series - Issue No. 2558Details
- Abstract:
- We document the impact of COVID-19 on frequently employed time series models, with a focus on euro area inflation. We show that for both single equation models (Phillips curves) and Vector Autoregressions (VARs) estimated parameters change notably with the pandemic. In a VAR, allowing the errors to have a distribution with fatter tails than the Gaussian one equips the model to better deal with the COVID-19 shock. A standard Gaussian VAR can still be used for producing conditional forecasts when relevant off-model information is used. We illustrate this by conditioning on official projections for a set of variables, but also by tilting to expectations from the Survey of Professional Forecasters. For Phillips curves, averaging across many conditional forecasts in a thick modelling framework offers some hedge against parameter instability.
- JEL Code:
- C53,E31,E37
- 26 May 2021
-
InterviewDetails
- Subtitle:
- Interview with Fabio Panetta, Member of the Executive Board of the ECB, conducted by Jun Ishikawa
- 25 May 2021
-
SpeechDetails
- Subtitle:
- Presentation by Philip R. Lane, Member of the Executive Board of the ECB, at the Peterson Institute for International Economics
- 25 May 2021
-
Weekly financial statementAnnexes
- 25 May 2021
-
Weekly financial statement - Commentary
- 25 May 2021
-
Survey of Monetary Analysts
- 21 May 2021
-
Working Paper Series - Issue No. 2557Details
- Abstract:
- Using a new survey of European households, we study how exogenous variation in the macroeconomic uncertainty perceived by households affects their spending decisions. We use randomized information treatments that provide different types of information about the first and/or second moments of future economic growth to generate exogenous changes in the perceived macroeconomic uncertainty of some households. The effects on their spending decisions relative to an untreated control group are measured in follow-up surveys. Higher macroeconomic uncertainty induces households to reduce their spending on non-durable goods and services in subsequent months as well as to engage in fewer purchases of larger items such as package holidays or luxury goods. Moreover, uncertainty reduces household propensity to invest in mutual funds. These results support the notion that macroeconomic uncertainty can impact household decisions and have large negative effects on economic outcomes.
- JEL Code:
- E3,E4,E5
- 21 May 2021
-
Occasional Paper Series - Issue No. 257Details
- Abstract:
- This paper looks at the impact of mitigation policies implemented by supervisory and macroprudential authorities as well as national governments in the euro area during the coronavirus (COVID-19) pandemic to support lending to the real economy. The impact assessment concerns joint, and individual, effect of supervisory measures introduced by the ECB Banking Supervision, a reduction in macroprudential buffers put forward by national macroprudential authorities, and public moratoria and guarantee schemes. The analysis has been conducted in the first half of 2020, in a situation of high uncertainty about how the crisis will develop in the future. Against this backdrop, it proposes a method of addressing such uncertainty by assessing the impact of policies across a full range of scenarios. We find that the supervisory, macroprudential and government policies should have helped to maintain higher lending to the non-financial private sector (around 5% higher than lending in the absence of policy measures) and, in particular, to non-financial corporations (12% higher than lending in the absence of policy measures), preventing further amplification of the recession via the banking sector. The national and supervisory and macroprudential actions have reinforced each other, and have been jointly able to affect a broader share of the banking sector.
- JEL Code:
- E37,E58,G21,G28
- 21 May 2021
-
Euro area investment fund statisticsAnnexes
- 20 May 2021
-
Euro area investment fund statistics
- 21 May 2021
-
Euro area financial vehicle corporation statisticsAnnexes
- 21 May 2021
-
Euro area financial vehicle corporation statistics
- 20 May 2021
-
Working Paper Series - Issue No. 2556Details
- Abstract:
- Macroprudential policymakers assess medium-term downside risks to the real economy arising from financial imbalances and implement policies aimed at managing those risks. In doing so, they face an inherent intertemporal trade-off between the expected growth and downside risks. This paper reviews the literature on Growth-at-Risk, embeds it in the wider literature on macroprudential policy, and proposes an empirical risk management framework that combines insights from the two literatures, by forecasting the entire real GDP growth distribution with a structural quantile vector autoregressive model. It accounts for direct and indirect interactions between financial vulnerabilities, financial stress and real GDP growth and allows for potential non-linear amplification effects. The framework provides policymakers with a macro-financial stress test to monitor downside risks to the economy and a macroprudential stance metric to quantify when interventions may be beneficial.
- JEL Code:
- G21,C33
- Network:
- Discussion papers
- 20 May 2021
-
Discussion Paper Series - Issue No. 14Details
- Abstract:
- Macroprudential policymakers assess medium-term downside risks to the real economy arising from financial imbalances and implement policies aimed at managing those risks. In doing so, they face an inherent intertemporal trade-off between the expected growth and downside risks. This paper reviews the literature on Growth-at-Risk, embeds it in the wider literature on macroprudential policy, and proposes an empirical risk management framework that combines insights from the two literatures, by forecasting the entire real GDP growth distribution with a structural quantile vector autoregressive model. It accounts for direct and indirect interactions between financial vulnerabilities, financial stress and real GDP growth and allows for potential non-linear amplification effects. The framework provides policymakers with a macro-financial stress test to monitor downside risks to the economy and a macroprudential stance metric to quantify when interventions may be beneficial.
- JEL Code:
- G21,C33
- 20 May 2021
-
Balance of payments (monthly)
- 19 May 2021
-
Working Paper Series - Issue No. 2555Details
- Abstract:
- This paper presents a toolkit for generating optimal policy projections. It makes five contributions. First, the toolkit requires a minimal set of inputs: only a baseline projection for target and instrument variables and impulse responses of those variables to policy shocks. Second, it solves optimal policy projections under commitment, limited-time commitment, and discretion. Third, it handles multiple policy instruments. Fourth, it handles multiple constraints on policy instruments such as a lower bound on the policy rate and an upper bound on asset purchases. Fifth, it allows alternative approaches to address the forward guidance puzzle. The toolkit that accompanies this paper is Dynare compatible, which facilitates its use. Examples replicate existing results in the optimal monetary policy literature and illustrate the usefulness of the toolkit for highlighting policy trade-offs. We use the toolkit to analyse US monetary policy at the height of the Great Financial Crisis. Given the Fed’s early-2009 baseline macroeconomic projections, we find the Fed’s planned use of the policy rate was close to optimal whereas a more aggressive QE program would have been beneficial.
- JEL Code:
- C61,C63,E52,E58
- 19 May 2021
-
Working Paper Series - Issue No. 2554Details
- Abstract:
- In this paper we present a methodology of model-based calibration of additional capital needed in an interconnected financial system to minimize potential contagion losses. Building on ideas from combinatorial optimization tailored to controlling contagion in case of complete information about an interbank network, we augment the model with three plausible types of fire sale mechanisms. We then demonstrate the power of the methodology on the euro area banking system based on a network of 373 banks. On the basis of an exogenous shock leading to defaults of some banks in the network, we find that the contagion losses and the policy authority's ability to control them depend on the assumed fire sale mechanism and the fiscal budget constraint that may or may not restrain the policy authorities from infusing money to halt the contagion. The modelling framework could be used both as a crisis management tool to help inform decisions on capital/liquidity infusions in the context of resolutions and precautionary recapitalisations or as a crisis prevention tool to help calibrate capital buffer requirements to address systemic risks due to interconnectedness.
- JEL Code:
- C61,D85,G01,G18,G21,G28,L14
- 19 May 2021
-
Financial Stability Review - Issue No. 1Annexes
- 19 May 2021
Related- 19 May 2021
- 19 May 2021
-
Press releaseRelated
- 19 May 2021
-
Financial Stability Review - Issue No. 1
- 19 May 2021
-
SpeechDetails
- Subtitle:
- Introductory remarks by Fabio Panetta, Member of the Executive Board of the ECB, at the 14th Payment Forum of Suomen Pankki − Finlands Bank, Helsinki, 19 May 2021
- 18 May 2021
-
Weekly financial statementAnnexes
- 18 May 2021
-
Weekly financial statement - Commentary
- 18 May 2021
-
Working Paper Series - Issue No. 2553Details
- Abstract:
- This paper presents evidence that personal relationships between corporate borrowers and bank loan officers improve the outcomes of loan renegotiation. Analysing a bank reorganization in Greece in the mid-2010s, I find that firms that experience an exogenous interruption in their loan officer relationship confront three consequences: one, the firms are less likely to renegotiate their loans; two, conditional on renegotiation, the firms are given tougher loan terms; and three, the firms are more likely to alter their capital structure. These results point to the importance of lending relationships in mitigating the cost of distress for borrowers in loan renegotiations.
- JEL Code:
- G21,L14,E44,E58,O16
- Network:
- Research Task Force (RTF)
- 18 May 2021
-
Euro money market statistics
- 18 May 2021
-
Financial Stability Review - ArticleFinancial Stability Review Issue 1, 2021Details
- Abstract:
- Policy measures aimed at supporting corporates and the economy through the coronavirus pandemic may have supported not just otherwise viable firms, but also unprofitable but still operating firms – often referred to as “zombies”. This has in turn raised questions about an increased risk of zombification in the euro area economy, which could constrain the post-pandemic recovery. Firm-level, loan-level and supervisory data for euro area companies suggest that zombie firms may have temporarily benefited from loan schemes and accommodative credit conditions – but likely only to a modest degree. These firms may face tighter eligibility criteria for schemes and more recognition of credit risk in debt and loan pricing in the future. Tackling the risk of zombification more fundamentally requires the consideration of suggested reforms to insolvency frameworks and better infrastructure for banks to manage non-performing loans.
- JEL Code:
- E51,G21,G32,G38,L25
- 17 May 2021
-
Working Paper Series - Issue No. 2552Details
- Abstract:
- This paper investigates whether the funding behaviour of euro area debt management offices (DMOs) changed with the start of the ECB’s Public Sector Purchase Programme (PSPP). Our results show that (i) lower yield levels and (ii) PSPP purchases supported higher maturities at issuance. The former indicates a behaviour of "locking in low rates for longer", while the latter suggests the existence of an additional "demand effect" of the PSPP on DMO strategies beyond the PSPP’s effect via yields. The combined impact of the PSPP via these channels amounts to maturity extensions at issuance of about one year in our estimation.
- JEL Code:
- E52,E58,E63,H63
- 17 May 2021
-
Financial Stability Review - ArticleFinancial Stability Review Issue 1, 2021Details
- Abstract:
- The ECB has been intensifying its quantitative work aimed at capturing climate-related risks to financial stability. This includes estimating financial system exposures to climate-related risks, upgrading banking sector scenario analysis and monitoring developments in the financing of the green transition. Considerable progress has been made on capturing banking sector exposures to firms that are subject to physical risks from climate change. While data and methodological challenges are still a focus of ongoing debates, our analyses suggest (i) somewhat concentrated bank exposures to physical and transition risk drivers, (ii) a prevalence of exposures amongst more vulnerable banks and in specific regions, (iii) risk-mitigating potential for interactions across financial institutions, and (iv) strong inter-temporal dependency conditioning the interaction of transition and physical risks. At the same time, investor interest in “green finance” continues to grow – but so-called greenwashing concerns need to be addressed to foster efficient market mechanisms. Both the assessment of risks and the allocation of finance to support the orderly transition to a more sustainable economy can benefit from enhanced disclosures, including of firms’ forward-looking emission targets, better data and strengthened risk assessment methodologies, among other things.
- JEL Code:
- G10,G18,G20,Q54
- 14 May 2021
-
Governing Council decisions - Other decisions
- 14 May 2021
-
Monetary policy account
- 14 May 2021
-
Working Paper Series - Issue No. 2551Details
- Abstract:
- Using a difference-in-differences approach and relying on confidential supervisory data and an unique proprietary data set available at the European Central Bank related to the 2016 EU-wide stress test, this paper presents novel empirical evidence that supervisory scrutiny associated to stress testing has a disciplining effect on bank risk. We find that banks that participated in the 2016 EU-wide stress test subsequently reduced their credit risk relative to banks that were not part of this exercise. Relying on new metrics for supervisory scrutiny that measure the quantity, potential impact, and duration of interactions between banks and supervisors during the stress test, we find that the disciplining effect is stronger for banks subject to more intrusive supervisory scrutiny during the exercise.
- JEL Code:
- G11,G21,G28
- 14 May 2021
-
Working Paper Series - Issue No. 2550Details
- Abstract:
- Do climate-oriented regulatory policies affect the flow of credit towards polluting corporations? We match loan-level data to firm-level greenhouse gas emissions to assess the impact of the Paris Agreement. We find that, following this agreement, European banks reallocated credit away from polluting firms. In the aftermath of President Trump’s 2017 announcement that the United States was withdrawing from the Paris Agreement, lending by European banks to polluting firms in the United States decreased even further in relative terms. It follows that green regulatory initiatives in banking can have a significant impact combating climate change.
- JEL Code:
- E51,G28,H23
- 12 May 2021
-
Working Paper Series - Issue No. 2549Details
- Abstract:
- In this paper, we survey the nascent literature on the transmission of negative policy rates. We discuss the theory of how the transmission depends on bank balance sheets, and how this changes once policy rates become negative. We review the growing evidence that negative policy rates are special because the pass-through to banks’ retail deposit rates is hindered by a zero lower bound. We summarize existing work on the impact of negative rates on banks’ lending and securities portfolios, and the consequences for the real economy. Finally, we discuss the role of different “initial” conditions when the policy rate becomes negative, and potential interactions between negative policy rates and other unconventional monetary policies.
- JEL Code:
- E44,E52,E58,G20,G21
- 12 May 2021
-
Working Paper Series - Issue No. 2548Details
- Abstract:
- We investigate asset returns around banking crises in 44 advanced and emerging economies from 1960 to 2018. In contrast to the view that buying assets during banking crises is a profitable long-run strategy, we find returns of equity and other asset classes generally underperform after banking crises. While prices are depressed during crises and partially recover after acute stress ends, consistent with theories of fire sales and intermediary-based asset pricing, we argue that investors do not fully anticipate the consequences of debt overhang, which result in lower long-run dividends. Our results on bank stock underperformance suggest that government-funded bank recapitalizations can often lead to substantial taxpayer losses.
- JEL Code:
- G11,G14,G15,G41
- Network:
- Research Task Force (RTF)
- 12 May 2021
-
Euro area securities issues statisticsAnnexes
- 12 May 2021
-
Euro area securities issues statistics
- 12 May 2021
-
Euro area securities issues statistics
- 12 May 2021
-
Forum on Central Banking - Conference proceedings
- 12 May 2021
-
Forum on Central Banking - Conference proceedings
- 11 May 2021
-
Weekly financial statementAnnexes
- 11 May 2021
-
Weekly financial statement - Commentary
- 11 May 2021
- 11 May 2021
- 11 May 2021
-
The ECB BlogDetails
- Subtitle:
- Climate change and sustainability are global challenges that require global solutions, especially in the financial sector, writes Executive Board member Fabio Panetta. We need international disclosure standards and principles to categorise sustainable activities.
- 10 May 2021
-
Working Paper Series - Issue No. 2547Details
- Abstract:
- This paper examines whether central bank communication stabilises euro area inflation expectations through the information and news channel. A novelty of the study is its use of data from Google Analytics on ECB website traffic as proxy for visitors’ attention to its communication. We conduct several econometric tests with daily data to measure the impact of ECB communication on the information demand of the public and ultimately on inflation expectations. Overall, this study shows that website attention, as captured by search volumes of visitors, influences euro area inflation expectations. We find that increased website attention contributes to narrowing the gap between market-based forecasts and (the mean of) longer-term professional inflation expectations. Our findings add to the theoretical evidence on the existence of an information and news channel.
- JEL Code:
- C20,D80,E52,E58,G14
- 10 May 2021
-
InterviewDetails
- Subtitle:
- Interview with Philip R. Lane, Member of the Executive Board of the ECB, conducted by Eric Albert and Marie Charrel
- 8 May 2021
-
InterviewDetails
- Subtitle:
- Interview with Frank Elderson, Member of the Executive Board of the ECB, conducted by Annemiek Leclaire
- 7 May 2021
-
Working Paper Series - Issue No. 2546Details
- Abstract:
- We revisit the effects of globalisation over the past 50 years in a large sample of advanced and emerging countries. We use accessions to \Globalisation Clubs" (WTO, OECD, EU), financial liberalisation and an instrument for trade openness to study the trade-off between efficiency (proxied by real GDP per capita and TFP) and equity (proxied by the labour share of income and the Gini index of inequality). We find that (i) most of our episodes lead to an increase in trade openness (ii) effects on GDP per capita are mostly positive with some interesting exceptions and (iii) there is little evidence that globalisation shocks lead to more inequality.
- JEL Code:
- F13,F36
- 7 May 2021
-
Working Paper Series - Issue No. 2545Details
- Abstract:
- We build a three-period model to investigate market failures in the market-based financial system. Institutional investors (IIs), such as insurance companies and pension funds, have liabilities offering guaranteed returns and operate under a risk-sensitive solvency constraint. They seek to allocate funds to asset managers (AMs) that provide diversification when investing in risky assets. At the interim date, AMs that run investment funds face investor redemptions and liquidate risky assets and/or deplete cash holdings, if available. Dealer banks can purchase risky assets, thus providing market liquidity. The latter ultimately determines equilibrium allocations. In the competitive equilibrium, AMs suffer from a pecuniary externality and hold inefficiently low amounts of cash. Asset fire sales increase the overall cost of meeting redemptions and depress risk-adjusted returns delivered by AMs to IIs, forcing the latter to de-risk. We show that a macroprudential approach to (i) the liquidity regulation of AMs and (ii) the solvency regulation of IIs can improve upon the competitive equilibrium allocations.
- JEL Code:
- D62,G01,G23,G38
- 7 May 2021
- 6 May 2021
-
SpeechDetails
- Subtitle:
- Speech by Christine Lagarde, President of the ECB, at the European Commission’s high-level conference on the proposal for a Corporate Sustainability Reporting Directive, 6 May 2021
- 6 May 2021
-
Economic Bulletin
- 6 May 2021
-
MFI interest rate statistics
- 6 May 2021
-
Economic Bulletin - BoxEconomic Bulletin Issue 3, 2021Details
- Abstract:
- This box reviews the factors behind the 11-percentage point swing in energy inflation between December 2020 and March 2021, with a particular focus on oil prices, base effects and the impact of indirect taxation. Base effects linked to the collapse of oil prices at the beginning of 2020 pushed up energy inflation by around 5 percentage points between December 2020 and March 2021, and this contribution can be expected to increase substantially further in April. The impact of the marked increase in oil prices since November 2020 has come on top of this. However, the strengthening of energy inflation in early 2021 has reflected not only oil price developments but also changes in taxes and other surcharges – including environmentally motivated measures such as the introduction of carbon emission certificates. Overall, energy inflation plays a prominent role in the temporary rise in overall HICP inflation projected for 2021 and its reduction in early 2022.
- JEL Code:
- E31,Q4,E37,H2,H23
- 6 May 2021
- 5 May 2021
-
SpeechDetails
- Subtitle:
- Speech by Philip R. Lane, Member of the Executive Board of the ECB, at the OMFIF virtual panel
- 5 May 2021
-
Economic Bulletin - BoxEconomic Bulletin Issue 3, 2021Details
- Abstract:
- We show how heterogeneous expectations across agents can change the macroeconomic outcomes of an increase in long-term inflation expectations. A broad-based expectation of higher longer-term inflation can be expected to lift the short to medium-term inflation outlook and have an expansionary effect on economic activity. If the financial markets are the only segment of the economy repricing higher longer-term inflation expectations, the associated tightening of financing conditions would hamper firms’ and households’ expenditure decisions and prevent any price pressures from building up.
- JEL Code:
- E1,E3,I1
- 5 May 2021
-
Economic Bulletin - ArticleEconomic Bulletin Issue 3, 2021Details
- Abstract:
- The experience of the last ten years shows that the composition of government debt plays an important role in several analytical and policy domains such as public debt management, financial stability and sovereign debt sustainability. Against this background, the article provides an overview of the evolution of the structure of public debt by holder in euro area countries and explores in more detail the structure of domestically held government debt with a special focus on households. In the first decade of EMU, the share of foreign holdings of euro area government debt, including both creditors from other euro area countries and creditors from outside the euro area, has been increasing owing to deepening financial integration. Following the global financial crisis and the euro area sovereign debt crisis, the share of domestic holdings increased again, first driven by holdings of banks and other financial corporations and, since 2015, mainly by central banks’ holdings. The role of households’ direct holdings of government debt is relatively limited at around 2% of total government debt in the euro area, although it is more sizeable in several euro area countries and in some other advanced economies. However, considering indirect holdings through investment funds, insurance corporations and pension funds, the share of households in financing government debt is more significant, albeit slightly decreasing over time, and amounted to almost 16% in the euro area in 2020.
- JEL Code:
- H6,H1,E21
- 4 May 2021
-
Weekly financial statementAnnexes
- 4 May 2021
-
Weekly financial statement - Commentary
- 4 May 2021
-
Working Paper Series - Issue No. 2544Details
- Abstract:
- We develop a horizontal R&D growth model that allows us to investigate the different channels through which financial reforms affect R&D investment and patent activity. First, a “micro” reform that abolishes barriers to entry in the banking sector produces a straightforward result: a decrease in lending rates which stimulates R&D investment and economic growth. Second, a “macro” reform that removes restrictions on banks’ reserves and credit controls. While this reform increases liquidity, it also increases the risk of default, potentially raising the cost of borrowing. This we dub the “reserves paradox” – this makes banks offset the rise in the default rate with a higher spread between loans and deposit rates. Thus our model suggests that whilst micro reforms boost innovation, macro reforms may appear negative. We test and find empirical support for these propositions using a sample of 21 OECD countries.
- JEL Code:
- G2,C23,E44,O43
- 4 May 2021
-
Economic Bulletin - ArticleEconomic Bulletin Issue 3, 2021Details
- Abstract:
- This article aims to take stock of how Brexit-related developments in UK import demand affected euro area foreign demand over the period 2016-19. UK import growth has slowed markedly since the Brexit referendum in 2016, particularly in terms of imports from the EU. We find that the depreciation of sterling squeezed UK household purchasing power, leading to lower import demand. We employ an ECM regression of UK import growth on the various GDP components and relative prices and detect a reduction in the UK’s overall import propensity since the referendum. We also identify sustainability risks for euro area foreign demand emanating from the UK’s balance of payments.
- JEL Code:
- F14,F17,F32
- 3 May 2021
-
Working Paper Series - Issue No. 2543Details
- Abstract:
- This paper studies how to combine real-time forecasts from a broad range of Bayesian vector autoregression (BVAR) specifications and survey forecasts by optimally exploiting their properties. To do that, it compares the forecasting performance of optimal pooling and tilting techniques, including survey forecasts for predicting euro area inflation and GDP growth at medium-term forecast horizons using both univariate and multivariate forecasting metrics. Results show that the Survey of Professional Forecasters (SPF) provides good point forecast performance, but also that SPF forecasts perform poorly in terms of densities for all variables and horizons. Accordingly, when the model combination or the individual models are tilted to SPF's first moments, point accuracy and calibration improve, whereas they worsen when SPF's second moments are included. We conclude that judgement incorporated in survey forecasts can considerably increase model forecasts accuracy, however, the way and the extent to which it is incorporated matters.
- JEL Code:
- C11,C32,C53,E27,E37
- 3 May 2021
-
€STR Transparency on errors
- 3 May 2021
-
Economic Bulletin - BoxEconomic Bulletin Issue 3, 2021Details
- Abstract:
- A rapid recovery in activity and trade has lengthened supplier delivery times, while international shipping costs have also increased. This box analyses the factors driving the surge in shipping costs by means of a Structural VAR model. It concludes that recent developments reflect rising demand and, to a smaller degree, supply constraints in the shipping industry. At the same time, the impact of rising shipping costs on overall consumer prices is expected to be limited.
- JEL Code:
- C11,F01,F41
- 3 May 2021
-
Economic Bulletin - ArticleEconomic Bulletin Issue 3, 2021Details
- Abstract:
- This article examines liquidity usage in TARGET2 – the real-time gross-settlement (RTGS) system owned and operated by the Eurosystem – and related developments over time. More specifically, it analyses the velocity at which liquidity circulates in the system and the interplay between the liquidity sources that participants use to fund their payment obligations. Growth in levels of central bank reserves has affected TARGET2 participants’ behaviour, giving lower incentives to recycle incoming liquidity, which is reflected in decreased liquidity velocity and an increased use of the central bank reserves on the account balance to fund outgoing payments. Interest rates are also found to affect the behaviour of TARGET2 participants. Moreover, it is shown that liquidity usage varies significantly across participants and countries. A bank-level panel analysis quantifies the impact of specific TARGET2 participant features and monetary policy decisions on liquidity usage in TARGET2.
- JEL Code:
- G10,G20,G21
- 3 May 2021
-
InterviewDetails
- Subtitle:
- Interview with Luis de Guindos, conducted by Tonia Mastrobuoni on 27 April 2021
- 30 April 2021
- 29 April 2021
-
InterviewDetails
- Subtitle:
- Interview with Philip R. Lane, Member of the Executive Board of the ECB, conducted by Gabriel Mellqvist on 29 April 2021
- 29 April 2021
-
SpeechDetails
- Subtitle:
- Keynote speech by Frank Elderson, Vice-Chair of the Supervisory Board and Member of the Executive Board of the ECB, at the conference on “The Role of Banks in Greening Our Economies” organised by the European Bank for Reconstruction and Development and Hrvatska narodna banka
- 29 April 2021
-
Euro area economic and financial developments by institutional sector (full)
- 29 April 2021
-
Euro money market - Issue No. 2020Related
- 29 April 2021
-
Press release
- 29 April 2021
-
Press releaseRelated
- 29 April 2021
-
Euro money market - Issue No. 2020
- 29 April 2021
-
Monetary developments in the euro areaAnnexes
- 29 April 2021
-
Monetary developments in the euro area
- 28 April 2021
-
InterviewDetails
- Subtitle:
- Interview on Twitter with Isabel Schnabel, Member of the Executive Board of the ECB, conducted and published on 28 April 2021
- 27 April 2021
-
Weekly financial statementAnnexes
- 27 April 2021
-
Weekly financial statement - Commentary
- 27 April 2021
-
Working Paper Series - Issue No. 2542Details
- Abstract:
- We compare sparse and dense representations of predictive models in macroeconomics, microeconomics and finance. To deal with a large number of possible predictors, we specify a prior that allows for both variable selection and shrinkage. The posterior distribution does not typically concentrate on a single sparse model, but on a wide set of models that often include many predictors.
- JEL Code:
- C11,C52,C53,C55
- 26 April 2021
-
SpeechDetails
- Subtitle:
- Speech by Philip R. Lane, Member of the Executive Board of the ECB, at the European Statistical Forum (virtual)
- 26 April 2021
-
SpeechDetails
- Subtitle:
- Welcome address by Fabio Panetta, Member of the Executive Board of the ECB, at the joint BIS, BoE, ECB and IMF conference on “Spillovers in a “post-pandemic, low-for-long” world”
- 26 April 2021
-
Working Paper Series - Issue No. 2541Details
- Abstract:
- This paper sheds light on the impact of global macroeconomic uncertainty on the euro area economy. We build on the methodology proposed by Jurado et al. (2015) and estimate global as well as country-specific measures of economic uncertainty for fifteen key euro area trade partners and the euro area. Our measures display a clear counter-cyclical pattern and line up well to a wide range of historical events generally associated with heightened uncertainty. In addition, following Piffer and Podstawski (2018), we estimate a Proxy SVAR where we instrument uncertainty shocks with changes in the price of gold around specific past events. We find that, historically, global uncertainty shocks have been important drivers of fluctuations in euro area economic activity, with one standard deviation increase in the identified uncertainty shock subtracting around 0.15 percentage points from euro area industrial production on impact.
- JEL Code:
- D81,C11,C55,E32,F41,F62
- 26 April 2021
-
Working Paper Series - Issue No. 2540Details
- Abstract:
- This paper explores whether foreign intermediaries stabilise or destabilise lending to the real economy in the presence of sovereign stress in the domestic economy and abroad. Tensions in the government debt market may lead to serious disruptions in the provision of lending (i.e., the so-called “doom loop”). In this context, the presence of foreign banks poses a fundamental, yet unexplored, trade-off. On the one hand, domestic sovereign shocks are broadly inconsequential for the lending capacity of foreign banks, given that their funding conditions are not hampered by such shocks. On the other, these intermediaries may react more harshly than domestic banks to a deterioration in local loan risk and demand conditions. We exploit granular and confidential data on euro area banks operating in different countries to assess this trade-off. Overall, the presence of foreign lenders is found to stabilise lending, thus mitigating the doom loop.
- JEL Code:
- E5,G21
- 23 April 2021
-
Governing Council decisions - Other decisions
- 23 April 2021
-
Working Paper Series - Issue No. 2539Details
- Abstract:
- This paper studies the effects of imperfect risk-sharing between lenders and borrowers on commercial property prices and leverage. The key friction is that agents use different discount rates to evaluate future flows. Eliminating this pecuniary externality generates large reductions in the volatility of real estate prices and credit. Therefore, policies that enhance risk-sharing between lenders and borrowers reduce the magnitude of boom-bust cycles in real estate prices. We also introduce health shocks to study the effect of the COVID-19 crisis on the commercial property market.
- JEL Code:
- E32,E44,G10,E23
- Network:
- Research Task Force (RTF)
- 23 April 2021
-
Working Paper Series - Issue No. 2538Details
- Abstract:
- We characterise the probability distributions of various categories of gross capital flows conditional on information contained in financial asset prices in a panel of emerging market economies, with a focus on ‘tail’ events. Our framework, based on the quantile regression methodology, allows for a separate role of push- and pull-type factors, and because it is based on high-frequency data, can quantify the likelihood of different outturns before official capital flows data are released. We find that both push and pull factors have heterogeneous effects across the distributions of gross capital flows, which are most marked in the left tails. We also explore the role of various policies, and find that macroprudential and capital flows management measures are stabilising, leading to lower chances of either large portfolio inflows or out flows.
- JEL Code:
- F32,F34,G15
- 23 April 2021
-
T2S Annual Report - Issue No. 2020
- 23 April 2021
- 23 April 2021
- 23 April 2021
- 23 April 2021
- 23 April 2021
-
Press releaseRelated
- 23 April 2021
-
Survey of Professional Forecasters
- 23 April 2021
- 23 April 2021
-
Survey of Professional ForecastersAnnexes
- -
-
Survey of Professional Forecasters
Related- 23 April 2021
- 23 April 2021
-
Economic Bulletin - BoxEconomic Bulletin Issue 3, 2021Details
- Abstract:
- This box summarises the main findings from contacts between ECB staff and representatives of 66 leading non-financial companies operating in the euro area. The exchanges took place between 23 March and 1 April 2021. According to these contacts, activity in much of the services sector continued to be strongly influenced by the prevalence of lockdowns and travel restrictions. Meanwhile, in the manufacturing sector, supply was increasingly failing to keep up with demand owing to shortages of inputs, which may continue for some weeks or months. Industrial companies pointed to some upward movement in prices, while prices in the services sector remained subdued.
- JEL Code:
- E2,E3,L2
- 22 April 2021
-
Monetary policy statementDetails
- Subtitle:
- Christine Lagarde, President of the ECB,
Luis de Guindos, Vice-President of the ECB
- 22 April 2021
-
Monetary policy decision
- 20 April 2021
-
Weekly financial statementAnnexes
- 20 April 2021
-
Weekly financial statement - Commentary
- 20 April 2021
-
Euro area bank lending survey - Issue No. 2021Annexes
- 20 April 2021
-
Euro area bank lending survey - Annex
Related- 20 April 2021
-
Press release
- 20 April 2021
-
Press releaseRelated
- 20 April 2021
-
Euro area bank lending survey - Issue No. 2021
- 19 April 2021
-
Balance of payments (monthly)
- 15 April 2021
-
Research Bulletin - Issue No. 83Details
- Abstract:
- ECB and Federal Reserve monetary policy both spill over to other countries. But these spillovers are asymmetric. Federal Reserve monetary policy shocks have a significant impact on economic activity in the euro area and the rest of the world, mainly by affecting financial conditions globally. Conversely, ECB monetary policy shocks have little impact on the US economy and on global financial conditions, but still significantly affect global trade and economic activity, especially in emerging markets.
- JEL Code:
- E44,E52,F3,E58,F42
- 14 April 2021
-
SpeechDetails
- Subtitle:
- Vortrag von Isabel Schnabel, Mitglied des Direktoriums der EZB, bei einem Webinar von Sven Giegold (MdEP) mit der Heinrich-Böll-Stiftung
- 14 April 2021
-
SpeechDetails
- Subtitle:
- Introductory remarks by Fabio Panetta, Member of the Executive Board of the ECB, at the ECON Committee of the European Parliament
- 14 April 2021
-
Press releaseRelated
- 14 April 2021
-
Survey on credit terms and conditions in euro-denominated securities financing and OTC derivatives marketsAnnexes
- 14 April 2021
- 14 April 2021
-
Other publication
- 14 April 2021
-
Euro area securities issues statisticsAnnexes
- 14 April 2021
-
Euro area securities issues statistics
- 14 April 2021
-
Euro area securities issues statistics
- 14 April 2021
-
Other publicationRelated
- 14 April 2021
-
Annual Report
- 14 April 2021
-
Feedback on the input provided by the European Parliament as part of its resolution on the ECB’s Annual ReportRelated
- 14 April 2021
-
Annual Report
- 14 April 2021
- 14 April 2021
-
SpeechDetails
- Subtitle:
- Introductory remarks by Luis de Guindos, Vice-President of the ECB, at the ECON Committee of the European Parliament (by videoconference)
Related- 14 April 2021
-
Annual Report
- 14 April 2021
- 14 April 2021
-
Annual Report - Statistical annex
- 14 April 2021
-
Annual ReportRelated
- 14 April 2021
- 14 April 2021
- 14 April 2021
-
Other publication
- 18 February 2021
-
Annual Accounts
- 14 April 2021
- 14 April 2021
-
Other publication
- 13 April 2021
-
Weekly financial statementAnnexes
- 13 April 2021
-
Weekly financial statement - Commentary
- 13 April 2021
-
Working Paper Series - Issue No. 2537Details
- Abstract:
- Increased investment in clean electricity generation or the introduction of a carbon tax will most likely lead to higher electricity prices. We examine the effect from changing electricity prices on manufacturing employment. Analyzing firm-level data, we find that rising electricity prices lead to a negative impact on labor demand and investment in sectors most reliant on electricity as an input factor. Since these sectors are unevenly spread across countries and regions, the labor impact will also be unevenly spread with the highest impact in Southern Germany and Northern Italy. We also identify an additional channel that leads to heterogeneous responses. When electricity prices rise, financially constrained firms reduce employment more than less constrained firms. This implies a potentially mitigating role for monetary policy.
- JEL Code:
- E52,H23,J23,Q48
- 12 April 2021
-
InterviewDetails
- Subtitle:
- Interview with Christine Lagarde, President of the ECB, conducted by Sara Eisen on 9 April 2021 and broadcast on the same day
- 12 April 2021
-
Working Paper Series - Issue No. 2536Details
- Abstract:
- Foreign driven medium-term oscillations that originate from fluctuations in technological frontier countries gained widespread attention among policymakers. To study this phenomenon in the context of domestic and other foreign drivers of the euro area business cycle, we develop a medium-scale, two-economy dynamic stochastic general equilibrium model with endogenous growth and estimate it with Bayesian methods for the United States and the euro area for the period from 1984:Q1 to 2017:Q4. The framework suggests that foreign shocks can be a substantial source of medium-term oscillations that contribute to pro-cyclicality of real GDP across countries. Notably, US shocks to liquidity preference and trade demand explain more than a third of the euro area downturn during the Great Recession.
- JEL Code:
- E2,E5,F1,F4,O4
- 12 April 2021
-
Working Paper Series - Issue No. 2535Details
- Abstract:
- This study analyses the effects of euro area monetary policy on equity risk premia (ERP). We find that changes in equity prices during periods of accommodative monetary policy mainly reflected adjustments in the discount factor and economic activity – rather than fluctuations in investors’ required risk compensation. Furthermore, the ERP appears to not have declined much since the introduction of unconventional monetary policy and stands higher than prior to the GFC. Use of identified monetary policy shocks points to insignificant effects of monetary policy on the ERP. Further breakdown of these shocks reveals that monetary policy has a significant upwards impact on the ERP if it is perceived as a negative information surprise, while the opposite prevails in the case of a genuine accommodative monetary policy surprise. Accumulating these effects over time suggests that the two might have largely offset each other since the introduction of unconventional monetary policy.
- JEL Code:
- E22,E52,G12
- 12 April 2021
-
Other publication - Issue No. 2021
- 12 April 2021
-
Macroprudential Bulletin - Article - Issue No. 12Details
- Abstract:
- Large differences between the liquidity of investment funds’ assets and liabilities (i.e. liquidity mismatches) can create vulnerabilities in the financial system and expose funds to a risk of large outflows and sudden drops in market liquidity. From a macroprudential perspective, the current regulatory framework may not sufficiently address the risks stemming from liquidity mismatches in investment funds. By modelling the liquidity management of an open-ended fund, this article provides theoretical justification for pre-emptive policy measures such as cash buffers that enhance financial stability by helping to increase the resilience of investment funds.
- JEL Code:
- G11,G23,G28
- 12 April 2021
-
Macroprudential Bulletin - Article - Issue No. 12Details
- Abstract:
- Following the onset of the coronavirus (COVID‑19) crisis, a significant number of European investment funds suspended redemptions. We find that many of those funds had invested in illiquid assets, were leveraged or had lower cash holdings than funds that were not suspended. Furthermore, suspensions were more likely to be seen in jurisdictions where pre-emptive liquidity measures were not available. Our findings also suggest that suspensions have spillover effects on other funds and sectors, highlighting the importance of pre-emptive liquidity management measures.
- JEL Code:
- G23,G28,G01
- 12 April 2021
-
Macroprudential Bulletin - Article - Issue No. 12Details
- Abstract:
- The turmoil seen in March 2020 highlighted key vulnerabilities in the money market fund (MMF) sector. This article assesses the effectiveness of the EU’s regulatory framework from a financial stability perspective and identifies three important lessons. First, investment in non-public debt assets exposes MMFs to liquidity risk, highlighting the need to limit investment in illiquid assets. Second, low-volatility net asset value (LVNAV) funds are particularly vulnerable to liquidity shocks, given that they invest in non-public debt assets while offering a stable net asset value (NAV). Enhanced portfolio requirements could strengthen their liquidity profile. And third, MMFs seem reluctant to draw down on their liquidity buffers during periods of stress, suggesting a need to make buffers more usable.
- JEL Code:
- G23,G28,G01
- 12 April 2021
-
Macroprudential Bulletin - Article - Issue No. 12Details
- Abstract:
- During the market turmoil of March 2020, many money market funds (MMFs) and other investment funds which were exposed to liquidity risk through a liquidity mismatch between their assets and liabilities experienced significant outflows. Those funds reacted in a procyclical manner by either selling assets in already stressed markets or curtailing investors’ access. That behaviour resulted in knock-on effects on other sectors of the economy and amplified the stress within the financial system. This overview article discusses financial stability risks arising from liquidity transformation by MMFs and other investment funds, a subject which is then explored in greater depth in the three other articles in this issue of the Macroprudential Bulletin. While the liquidity transformation carried out by investment funds serves an important economic function, by intermediating savings and real economy financing, it can also generate risks to financial stability. With this in mind, this article argues for a macroprudential approach to the regulation of investment funds to enhance their resilience and facilitate a stable provision of funding to the wider economy in both normal market conditions and periods of market stress.
- JEL Code:
- G01,G23,G28
- 11 April 2021
-
InterviewDetails
- Subtitle:
- Interview with Fabio Panetta, Member of the Executive Board of the ECB, conducted by Luis Doncel and published on 11 April 2021
- 9 April 2021
-
Working Paper Series - Issue No. 2534Details
- Abstract:
- We address the identification of low-frequency macroeconomic shocks, such as technology, in Structural Vector Autoregressions. Whilst identification issues with long-run restrictions are well documented, we demonstrate that the recent attempt to overcome said issues using the Max-Share approach of Francis et al. (2014) and Barsky and Sims (2011) has its own shortcomings, primarily that they are vulnerable to bias from confounding non-technology shocks, although less so than long-run specifications. We offer a new spectral methodology to improve empirical identification. This new preferred methodology offers equivalent or improved identification in a wide range of data generating processes and when applied to US data. Our findings on the bias generated by confounding shocks also importantly extends to the identification of dominant business-cycle shocks, which will be a combination of shocks rather than a single structural driver. This can result in a mis-characterization of the business cycle anatomy.
- JEL Code:
- C11,C30,E32
- 9 April 2021
-
Working Paper Series - Issue No. 2533Details
- Abstract:
- Frequently, factors other than structural developments in technology and production efficiency drive changes in labor productivity in advanced and emerging market and developing economies (EMDEs). This paper uses a new method to extract technology shocks that excludes these influences, resulting in lasting improvements in labor productivity. The same methodology in turn is used to identify a stylized example of the effects of a demand shock on productivity. Technology innovations are accompanied by higher and more rapidly increasing rates of investment in EMDEs relative to advanced economies, suggesting that positive technological developments are often capital-embodied in the former economies. Employment falls in both advanced economies and EMDEs following positive technology developments, with the effect smaller but more persistent in EMDEs. Uncorrelated technological developments across economies suggest that global synchronization of labor productivity growth is due to cyclical (demand) influences. Demand drivers of labor productivity are found to have highly persistent effects in EMDEs and some advanced economies. Unlike technology shocks, however, demand shocks influence labor productivity only through the capital deepening channel, particularly in economies with low capacity for counter-cyclical fiscal policy. Overall, non-technological factors accounted for most of the fall in labor productivity growth during 2007-08 and around one-third of the longer-term productivity decline after the global financial crisis.
- JEL Code:
- C30,E32,O40
- 9 April 2021
-
Euro area economic and financial developments by institutional sector (early)
- 9 April 2021
-
Balance of payments (quarterly)
- 9 April 2021
-
InterviewDetails
- Subtitle:
- Interview with Isabel Schnabel, Member of the Executive Board of the ECB, conducted by Tim Bartz and Stefan Kaiser on 1 April and published on 9 April 2021, in print on 10 April 2021
- 8 April 2021
-
Weekly financial statementAnnexes
- 8 April 2021
-
Weekly financial statement - Commentary
- 8 April 2021
-
Monetary policy account
- 8 April 2021
-
SpeechDetails
- Subtitle:
- Statement by Christine Lagarde, President of the ECB, at the forty-third meeting of the International Monetary and Financial Committee
- 8 April 2021
-
Eurosystem oversight report - Issue No. 2021
- 8 April 2021
-
Euro money market statistics
- 6 April 2021
-
Survey of Monetary Analysts
- 1 April 2021
-
The ECB BlogDetails
- Subtitle:
- The recent volatility of inflation can largely be attributed to the nature of the pandemic shock, writes Chief Economist Philip R. Lane. The increase in inflation during early 2021 does not constitute the basis for a sustained shift in inflation dynamics.
- 31 March 2021
-
Euro area pension fund statisticsAnnexes
- 31 March 2021
-
Euro area pension fund statistics
- 31 March 2021
-
MFI interest rate statistics
- 30 March 2021
-
Weekly financial statementAnnexes
- 30 March 2021
-
Weekly financial statement - Commentary
- 27 March 2021
-
SpeechDetails
- Subtitle:
- Remarks by Philip R. Lane, Member of the Executive Board of the ECB, at “The Outlook for the Economy and Finance” workshop (fully digital) organised by The European House − Ambrosetti
- 26 March 2021
-
Governing Council decisions - Other decisions
- 26 March 2021
- 26 March 2021
- 26 March 2021
- 26 March 2021
-
Letters to MEPs
- 26 March 2021
- 25 March 2021
-
The ECB BlogDetails
- Subtitle:
- At the ECB we are committed to understanding people’s needs and ensuring the digital euro would be widely accepted, writes Executive Board member Fabio Panetta with Ulrich Bindseil in The ECB Blog.
Related- 30 November 2022
-
The ECB Blog
- 13 July 2022
-
The ECB Blog
- 19 November 2021
-
The ECB Blog
- 14 July 2021
-
The ECB Blog
- 2 December 2020
-
The ECB Blog
- 2 October 2020
-
The ECB Blog
- 25 March 2021
-
Monetary developments in the euro areaAnnexes
- 25 March 2021
-
Monetary developments in the euro area
- 25 March 2021
-
Economic Bulletin
- 25 March 2021
-
Economic Bulletin - BoxEconomic Bulletin Issue 2, 2021Details
- Abstract:
- The coronavirus (COVID-19) pandemic triggered significant changes in household spending in 2020. These shifts are reflected in the 2021 HICP weights, and consequently, also in measured annual inflation. The impact of these new HICP weights on annual inflation is not insignificant and is also heterogenous across countries. Looking ahead, the full impact will most likely only materialise over the course of the year as the relative prices gradually change.
- JEL Code:
- E31,E32
- 25 March 2021
-
Economic Bulletin - BoxEconomic Bulletin Issue 2, 2021Details
- Abstract:
- This box shows how the economic impact of containment measures adopted in response to the pandemic differed across sectors and countries, and over time. The impact is assessed with a cross-sector vector autoregression (VAR) model. The results confirm that containment measures had a relatively large impact on sectors with non-teleworkable, contact-intensive occupations, such as recreational services. They also show that the impact of the measures varied across countries largely due to the different economic structures and containment policies. There is evidence that economic agents learned how to cope with the restrictions over time. This suggests that more targeted measures, coupled with behavioural responses by households and firms, helped limit the economic costs of containment policies during the renewed wave. Looking ahead, the large divergence in the economic impact of restrictions across sectors is likely to persist at least in the short term.
- JEL Code:
- E23,E27,E32
- 25 March 2021
-
Economic Bulletin - BoxEconomic Bulletin Issue 2, 2021Details
- Abstract:
- This box describes the ECB’s monetary policy operations during the seventh and eighth reserve maintenance periods from 4 November 2020 to 26 January 2021.
- JEL Code:
- E40,E52,E58
- 25 March 2021
-
Economic Bulletin - BoxEconomic Bulletin Issue 2, 2021Details
- Abstract:
- This box compares the economic performance of the euro area and the United States during 2020. While it is not yet possible to assess the long-term impact of the coronavirus (COVID-19) pandemic, it is interesting to take stock of the economic developments that have led to the worst loss in output in either region since the Second World War. Primarily as a result of the stricter pandemic-related lockdowns in the euro area, total GDP losses for 2020 somewhat exceeded those in the United States. Nevertheless, the pattern in private consumption was similar in both economies despite the considerably larger fiscal transfers provided in response to the crisis in the United States. Job retention schemes, which cushioned the significant adverse impact of the crisis on employment, and other direct transfers to firms and households have been key elements of the euro area’s fiscal support. Inflation was more subdued in the euro area, partly on account of special factors like the temporary reduction in German VAT.
- JEL Code:
- E31,E32,E62,J82
- 25 March 2021
-
SpeechDetails
- Subtitle:
- Speech by Isabel Schnabel, Member of the Executive Board of the ECB, at NYU Stern Fireside Chat
Annexes- 25 March 2021
-
Speech
- 24 March 2021
-
Economic Bulletin - BoxEconomic Bulletin Issue 2, 2021Details
- Abstract:
- Profit margins are an integral part of domestic price setting and have had an impact on the response of euro area inflation to the COVID-19 shock. While profits have fallen more strongly during the COVID-19 crisis than during earlier recessions, profit margins have shown an unusually high degree of resilience relative to the depth of the recession. The resilience of profit margins likely reflects the normal resilience of profit margins observed in recessions and, in addition, the impact of job retention schemes.
- JEL Code:
- E31
- 24 March 2021
-
Economic Bulletin - ArticleEconomic Bulletin Issue 2, 2021Details
- Abstract:
- This article reviews recent evidence on the interaction between monetary policy and household inequality. While economic inequality has been trending upwards in most advanced economies since the early 1980s, this analysis concludes that monetary policy has not been a major driver of those long-term trends. On the contrary, the accommodative monetary policies of recent years have had an equalising effect, particularly through employment gains for lower income households. Moreover, there is now more evidence showing that the distribution of income and wealth plays a key role in the transmission of monetary policy to household spending. However, while improvements to models and data have contributed to a better understanding of the ways in which household heterogeneity shapes the transmission of monetary policy, several unsolved puzzles remain, necessitating further research efforts.
- JEL Code:
- D3,E21,E52
- 23 March 2021
-
Weekly financial statementAnnexes
- 23 March 2021
-
Weekly financial statement - Commentary
- 23 March 2021
-
InterviewDetails
- Subtitle:
- Interview with Philip R. Lane, Member of the Executive Board of the ECB, conducted by Annette Weisbach on 22 March 2021
- 23 March 2021
-
Economic Bulletin - BoxEconomic Bulletin Issue 2, 2021Details
- Abstract:
- The EU’s recovery package has the potential to mitigate the heterogeneous fallout from the COVID-19 pandemic. Its effectiveness will depend on the achievement of an adequate balance of mutually reinforcing investments and reforms. To ensure a timely and efficient absorption of recovery funds for productive public spending, special attention should be paid to bolstering administrative capacity and reducing implementation bottlenecks.
- JEL Code:
- E60,F45,H12,O43
- 23 March 2021
-
Economic Bulletin - ArticleEconomic Bulletin Issue 2, 2021Details
- Abstract:
- Consumers’ inflation expectations play a key role in the monetary transmission mechanism. As such, it is crucial for monetary policymakers to understand their nature and how they are formed. This article shows that inflation (un)certainty is a channel that can shed light on some of the more puzzling aspects of reported quantitative inflation perceptions and expectations. It helps explain why these may be higher than actual inflation. This is because, in a situation of uncertainty, many consumers report in rounded numbers, often leading them to quantitatively overestimate inflation. We also show that the uncertainty framework fits with some of the stylised facts of consumers’ inflation expectations, such as their correlation with sociodemographic characteristics and economic sentiment. Furthermore, the uncertainty channel may also explain the negative correlation observed between the economic outlook and inflation expectations.
- JEL Code:
- D11,D12,D84,E31,E52
- 22 March 2021
-
The ECB BlogDetails
- Subtitle:
- Our pandemic emergency purchase programme (PEPP) has provided crucial support to euro area citizens since its launch a year ago, writes President Christine Lagarde in The ECB Blog. The PEPP has been, and remains, at the core of our pandemic policy response.
- 22 March 2021
-
Balance of payments (monthly)
- 22 March 2021
-
Economic Bulletin - BoxEconomic Bulletin Issue 2, 2021Details
- Abstract:
- This box examines developments in the euro area stock of capital, discusses how investment and depreciation rates have affected the capital stock in different directions, and reviews the varying impacts of the crisis across assets. The sharp decline in activity stemming from the pandemic and the associated containment measures has so far not translated into a sharp decline in the euro area capital stock.
- JEL Code:
- E22,E23,E32,O11,O40
- 22 March 2021
-
Economic Bulletin - ArticleEconomic Bulletin Issue 2, 2021Details
- Abstract:
- What explains the strong growth of euro banknote demand, given that the transactional use of banknotes seems to have decreased? Key to explaining this phenomenon – referred to as the “paradox of banknotes” – is acknowledgement of the importance of all three components of banknote demand: euro area transactional demand, euro area store-of-value demand and foreign demand. This article explains these components and estimates their relative size. It also addresses COVID-19-related banknote developments during 2020, highlighting the importance of cash during crises.
- JEL Code:
- E41,E51,E58
- Network:
- Eurosystem Research Network on Cash (EURECA)
- 19 March 2021
- 18 March 2021
-
SpeechDetails
- Subtitle:
- Vortrag von Isabel Schnabel, Mitglied des Direktoriums der EZB, beim Rotary Club (Distrikt 1900)
- 18 March 2021
-
SpeechDetails
- Subtitle:
- Speech by Luis de Guindos, Vice-President of the ECB, at the High-level conference on “Strengthening the EU’s bank crisis management and deposit insurance framework: for a more resilient and efficient banking union” organised by the European Commission
- 18 March 2021
-
Working Paper Series - Issue No. 2532Details
- Abstract:
- We introduce a flexible, time-varying network model to trace the propagation of interest rate surprises across different maturities. First, we develop a novel econometric framework that allows for unknown, potentially asymmetric contemporaneous spillovers across panel units, and establish the finite sample properties of the model via simulations. Second, we employ this innovative framework to jointly model the dynamics of interest rate surprises and to assess how various monetary policy actions, for example, short-term, long-term interest rate targeting and forward guidance, propagate across the yield curve. We find that the network of interest rate surprises is indeed asymmetric, and defined by spillovers between adjacent maturities. Spillover intensity is high, on average, but shows strong time variation. Forward guidance is an important driver of the spillover intensity. Pass-through from short-term interest rate surprises to longer maturities is muted, yet there are stronger spillovers associated with surprises at medium- and long-term maturities. We illustrate how our proposed framework helps our understanding of the ways various dimensions of monetary policy propagate through the yield curve and interact with each other.
- JEL Code:
- C21,C53,E43,E44,E52
- Network:
- ECB Lamfalussy Fellowship Programme
- 18 March 2021
-
Working Paper Series - Issue No. 2531Details
- Abstract:
- We build a business cycle model characterized by endogenous firms dynamics, where banks may prefer debt renegotiation, i.e. non-performing exposures, to outright borrowers default. We find that debt renegotiations only do not have adverse effects in the event of financial crisis episodes, but a large share of non-performing firms is associated with a sharp deterioration of economic activity in two cases. First, if there are congestion effects in banks ability to monitor non-performing loans. Second, if such loans adversely affect the commercial banks’ moral hazard problem due to their opacity. Aggressive interest rate reductions and quantitative easing limit defaults and the output contraction caused by a financial crisis, without ad- verse effects on the entry of new, more productive firms. The model shows that the observed long-run trend in the share of non-performing loans might be caused by the persistent reduction in technological advancements which drive firm entry rates and firms turnover.
- JEL Code:
- E32,E44,E50,E58
- Network:
- ECB Lamfalussy Fellowship Programme
- 18 March 2021
- 18 March 2021
-
SpeechDetails
- Subtitle:
- Introductory statement by Christine Lagarde, President of the ECB, at the Hearing of the ECON Committee of the European Parliament (by videoconference)
Annexes- 18 March 2021
-
Speech
- 18 March 2021
-
Research Bulletin - Issue No. 82Details
- Abstract:
- Many central bank measures implemented in past years – most recently the additional longer-term refinancing operations launched by the Eurosystem at the onset of the COVID-19 pandemic – aimed inter alia at safeguarding money market conditions. This is because smoothly functioning money markets are key for the transmission of monetary policy to credit conditions in the economy. In this article we look at money market conditions in the euro area over the past 15 years and discuss the interactions between money markets, central bank policies and new Basel III regulations.
- JEL Code:
- E44,E58,G12,G20,G28
- Network:
- Research Task Force (RTF)
- 18 March 2021
-
The ECB BlogDetails
- Subtitle:
- The damage caused by more frequent and severe natural disasters far exceeds the costs of transitioning to a greener economy, writes Vice-President Luis de Guindos in his ECB Blog post on our first climate stress test for banks and companies.
- 17 March 2021
-
InterviewDetails
- Subtitle:
- Interview on Twitter with Frank Elderson, Member of the Executive Board of the ECB, conducted and published on 16 March 2021
- 17 March 2021
-
InterviewDetails
- Subtitle:
- Interview with Isabel Schnabel, Member of the Executive Board of the ECB, conducted by Guillaume Benoit, Elsa Conesa, Lucie Robequain and Sophie Rolland
- 16 March 2021
-
Weekly financial statementAnnexes
- 16 March 2021
-
Weekly financial statement - Commentary
- 16 March 2021
-
InterviewDetails
- Subtitle:
- Interview with Philip R. Lane, Member of the Executive Board of the ECB, conducted by Martin Arnold
- 11 March 2021
-
Macroeconomic projections for the euro areaAnnexes
- 11 March 2021
-
Macroeconomic projections for the euro area
- 11 March 2021
-
Monetary policy statementDetails
- Subtitle:
- Christine Lagarde, President of the ECB,
Luis de Guindos, Vice-President of the ECB
- 11 March 2021
-
Monetary policy decision
- 10 March 2021
-
Euro area securities issues statisticsAnnexes
- 10 March 2021
-
Euro area securities issues statistics
- 10 March 2021
-
Euro area securities issues statistics
- 9 March 2021
-
Weekly financial statementAnnexes
- 9 March 2021
-
Weekly financial statement - Commentary
- 8 March 2021
-
The ECB BlogDetails
- Subtitle:
- One year into the pandemic, we can clearly see that the social and economic impact of the virus is particularly hard for women, writes President Christine Lagarde. In response we must choose to challenge women’s roles at home, at work and in our society.
- 3 March 2021
-
SpeechDetails
- Subtitle:
- Intervention by Isabel Schnabel, Member of the Executive Board of the ECB, at the “Greening Monetary Policy – Central Banking and Climate Change” online seminar, organised as part of the “Cleveland Fed Conversations on Central Banking”, 3 March 2021
Annexes- 3 March 2021
-
Speech
- 3 March 2021
-
SpeechDetails
- Subtitle:
- Welcome address by Fabio Panetta, Member of the Executive Board of the ECB, at the Third Annual Joint Conference of the Deutsche Bundesbank, European Central Bank and Federal Reserve Bank of Chicago on CCP Risk Management
- 3 March 2021
-
Working Paper Series - Issue No. 2530Details
- Abstract:
- In a highly interlinked global economy a key question is how foreign shocks transmit to the domestic economy, how domestic shocks affect the rest of the world, and how policy actions mitigate or amplify spillovers. For policy analysis in such a context global multi-country macroeconomic models that allow a structural interpretation are needed. In this paper we present a revised version of ECB-Global, the European Central Bank's global macroeconomic model. ECB-Global 2.0 is a semi-structural, global multi-country model with rich channels of international shock propagation through trade, oil prices and global financial markets for the euro area, the US, Japan, the UK, China, oil-exporting economies, Emerging Asia, and a rest-of-the-world block. Relative to the original version of model, ECB-Global 2.0 features dominant-currency pricing, tariffs and trade diversion. We illustrate the usefulness of ECB-Global exploring scenarios motivated by recent trade tensions between China and the US.
- JEL Code:
- C51,E30,E50
- 3 March 2021
-
Euro area insurance corporations statisticsAnnexes
- 2 March 2021
-
Euro area insurance corporations statistics
- 3 March 2021
-
Survey on credit terms and conditions in euro-denominated securities financing and OTC derivatives marketsAnnexes
- 3 March 2021
-
Other publication
- 2 March 2021
- 3 March 2021
-
Press releaseRelated
- 3 March 2021
-
MFI interest rate statistics
- 2 March 2021
-
Weekly financial statementAnnexes
- 2 March 2021
-
Weekly financial statement - Commentary
- 2 March 2021
-
SpeechDetails
- Subtitle:
- Speech by Fabio Panetta, Member of the Executive Board of the ECB, at an online event organised by Bocconi University
- 2 March 2021
-
InterviewDetails
- Subtitle:
- Interview with Luis de Guindos, Vice-President of the European Central Bank (ECB), conducted by Sérgio Aníbal
- 1 March 2021
-
SpeechDetails
- Subtitle:
- Speech by Christine Lagarde, President of the ECB, at the “Jahresimpuls Mittelstand 2021” of Bundesverband Mittelständische Wirtschaft
- 1 March 2021
-
SpeechDetails
- Subtitle:
- Panel contribution by Luis de Guindos, Vice-President of the ECB, at the Banque de France / Sciences Po Financial Stability Review Conference 2021 “Is macroprudential policy resilient to the pandemic?”
- 26 February 2021
-
Working Paper Series - Issue No. 2529Details
- Abstract:
- We propose a new model of trading in OTC markets. Dealers accumulate inventories by trading with end-investors and trade among each other to reduce their inventory holding costs. Core dealers use a more efficient trading technology than peripheral dealers, who are heterogeneously connected to core dealers and trade with each other bilaterally. Connectedness affects prices and allocations if and only if the peripheral dealers’ aggregate inventory position differs from zero. Price dispersion increases in the size of this position. The model generates new predictions about the effects of dealers' connectedness and dealers' aggregate inventories on prices.
- JEL Code:
- G10,G12,G19
- 26 February 2021
-
SpeechDetails
- Subtitle:
- Keynote speech by Isabel Schnabel, Member of the Executive Board of the ECB, at the Third Annual Conference organised by the European Fiscal Board on “High Debt, Low Rates and Tail Events: Rules-Based Fiscal Frameworks under Stress”
Annexes- 26 February 2021
-
Speech
- 26 February 2021
-
InterviewDetails
- Subtitle:
- Interview with Philip R. Lane, Member of the Executive Board of the ECB, conducted by Andrés Stumpf on 22 February
- 25 February 2021
-
SpeechDetails
- Subtitle:
- Presentation by Luis de Guindos, Vice-President of the ECB, at the IESE Business School Alumni Learning Programme Webinar “Risk, reform and recovery in the eurozone”
- 25 February 2021
-
SpeechDetails
- Subtitle:
- Speech by Philip R. Lane, Member of the Executive Board of the ECB, at Comissão do Mercado de Valores Mobiliários
- 25 February 2021
-
Monetary developments in the euro areaAnnexes
- 25 February 2021
-
Monetary developments in the euro area
- 25 February 2021
-
Research Bulletin - Issue No. 81Details
- Abstract:
- Loan renegotiations are expected to surge following the coronavirus (COVID-19) outbreak and the subsequent crisis, as more loans default during recessions. At such times, managing lending relationships effectively becomes even more important for bank governance, risk, and credit supply. My study presents evidence that continuous lending relationships between bank loan officers and corporate borrowers improve the outcomes of loan renegotiations. The analysis draws on a novel dataset on corporate loans during a bank reorganisation in Greece in the mid-2010s. This dataset allows us to empirically identify the causal effect of interrupted relationships. My main findings are that firms that experience an exogenous interruption in their loan officer relationship are faced with three consequences. First, the firms are less likely to renegotiate a loan compared to firms with continuous relationships. Second, when loans are renegotiated, firms with interrupted loan officer relationships receive tougher loan terms. Third, these firms raise more equity, reduce their overall borrowing, and partially substitute borrowing from other banks. These results point to the importance of lending relationships in mitigating the cost of distress for borrowers renegotiating loans. It therefore suggests that bank managers, supervisors, and resolution authorities need to be mindful of the potential costs of changing loan officers.
- JEL Code:
- G21,L14,E44,E58,O16
- Network:
- Research Task Force (RTF)
- 25 February 2021
-
InterviewDetails
- Subtitle:
- Interview with Isabel Schnabel, Member of the Executive Board of the ECB, conducted by Ingūna Ukenābele on 22 February 2021
- 23 February 2021
-
Weekly financial statementAnnexes
- 23 February 2021
-
Weekly financial statement - Commentary
- 22 February 2021
-
SpeechDetails
- Subtitle:
- Speech by Christine Lagarde, President of the ECB, at the opening plenary session of the European Parliamentary Week 2021 in virtual format
- 22 February 2021
-
Working Paper Series - Issue No. 2528Details
- Abstract:
- The paper provides an ex-post analysis of the determinants of within-country regional heterogeneity of the labour market impact of COVID-19. By focussing on the first wave of the pandemic in the four largest euro area economies, it finds that the propagation of the economic impact across regions cannot be explained by the spread of infections only. Instead, a region’s economic structure is a significant driver of the observed heterogeneity. Moreover, our results suggest that a region's trade relations, both within and across countries, represent a relevant indirect channel through which COVID-19 related disruptions affect regional economic activity. In this regard, the analysis depicts vulnerabilities arising from potential disruptions of the highly integrated EU supply chains.
- JEL Code:
- R11,F14,J40,R15
- 22 February 2021
-
Survey of Monetary Analysts
- 22 February 2021
-
Legal conference proceedings
- 19 February 2021
-
Governing Council decisions - Other decisions
- 19 February 2021
-
Working Paper Series - Issue No. 2527Details
- Abstract:
- The Global Financial Crisis fostered the design and adoption of macroprudential policies throughout the world. This raises important questions for monetary policy. What, if any, is the relationship between monetary and macroprudential policies? In particular, how does the effectiveness of macroprudential policies (or lack thereof) influence the conduct of monetary policy? This discussion paper builds on the insights of recent theoretical and empirical research to address these questions.
- JEL Code:
- E3,E44,G01,G21
- Network:
- Discussion papers
- 19 February 2021
-
Working Paper Series - Issue No. 2526Details
- Abstract:
- We study the impact of the COVID-19 shock on the portfolio exposures of euro area investors. The analysis “looks-through” holdings of investment fund shares to first gauge euro area investors' full exposures to global debt securities and listed shares by sector at end-2019 and to subsequently analyse the portfolio shifts in the first and second quarters of 2020. We show important heterogeneous patterns across asset classes and sectors, but also across euro area less and more vulnerable countries. In particular, we find a broad-based rebalancing towards domestic sovereign debt at the expense of extra-euro area sovereigns, consistent with heightened home bias. These patterns were strongly driven by indirect holdings – via investment funds – especially for insurance companies and pension funds, but levelled off in the second quarter. On the contrary, for listed shares we find that euro area investors rebalanced away from domestic towards extra-euro area securities in both the first and the second quarter, which may be associated with better relative foreign stock market performance. Many of these shifts were only due to indirect holdings, corroborating the importance of investment funds in assessing investors' exposures via securities, in particular in times of large shocks. We also confirm the important intermediation role played by investment funds in an analysis focusing on the large-scale portfolio rebalancing observed between 2015 and 2017 during the ECB's Asset Purchase Programme.
- JEL Code:
- F30,F41,G15
- 19 February 2021
-
Discussion Paper Series - Issue No. 13Details
- Abstract:
- The Global Financial Crisis fostered the design and adoption of macroprudential policies throughout the world. This raises important questions for monetary policy. What, if any, is the relationship between monetary and macroprudential policies? In particular, how does the effectiveness of macroprudential policies (or lack thereof) influence the conduct of monetary policy? This discussion paper builds on the insights of recent theoretical and empirical research to address these questions.
- JEL Code:
- E3,E44,G01,G21
- 19 February 2021
-
Euro area financial vehicle corporation statisticsAnnexes
- 18 February 2021
-
Euro area financial vehicle corporation statistics
- 19 February 2021
-
Euro area investment fund statisticsAnnexes
- 19 February 2021
-
Euro area investment fund statistics
- 19 February 2021
-
Balance of payments (monthly)
- 18 February 2021
-
SpeechDetails
- Subtitle:
- Guest lecture by Isabel Schnabel, Member of the Executive Board of the ECB, at the University of Chicago Booth School of Business
- 18 February 2021
-
Monetary policy account
- 18 February 2021
-
Annual consolidated balance sheet of the Eurosystem - Issue No. 2020Annexes
- 18 June 2021
-
Annual consolidated balance sheet of the Eurosystem
- 18 February 2021
-
Press releaseRelated
- 18 February 2021
-
Annual Accounts
- 18 February 2021
-
Annual AccountsRelated
- 18 February 2021
-
Press release
- 14 April 2021
-
Annual Report
- 17 February 2021
- 16 February 2021
-
Weekly financial statementAnnexes
- 16 February 2021
-
Weekly financial statement - Commentary
- 16 February 2021
-
Euro money market statistics
- 15 February 2021
- 15 February 2021
- 13 February 2021
-
The ECB BlogDetails
- Subtitle:
- Climate change requires urgent action and we at the ECB must be committed to doing our part, says Executive Board member Frank Elderson. The EU Treaties define clear obligations and limits. They provide substantial scope for the ECB to take action on climate change.
- 12 February 2021
-
Working Paper Series - Issue No. 2525Details
- Abstract:
- Net trading income is an important but volatile source of revenue for many euro area banks deemed to be highly sensitive to changes in financial market conditions. We propose a two-step econometric approach to quantify the downside risk of financial shocks on the banks’ trading revenues. First, we estimate the parameters of a fixed-effects quantile autoregressive model conditional on exogenous macro-financial shocks and bank characteristics. In the second step, we approximate the entire empirical conditional distribution of net trading income across all banks and time horizons by interpolating between the estimated quantiles. Based on the estimated distribution function, we derive two key metrics that summarize conditional left tail risks: i) conditional shortfall, ii) material loss probability. These measures are relevant in a stress test exercise whose aim to gauge CET-1 capital depletion under an adverse macro-financial scenario. We apply our methodology on supervisory data for a representative sample of European banks over the period spanning from the first quarter of 2015 to the last quarter of 2020. We find that the lower quantiles of net trading revenue distribution are significantly impacted by deteriorating financial conditions, whereas the upper quantiles seem to be stable over time.
- JEL Code:
- C21,C23,G21,G28
- 11 February 2021
-
Working Paper Series - Issue No. 2524Details
- Abstract:
- We propose a dynamic semi-parametric framework to study time variation in tail parameters. The framework builds on the Generalized Pareto Distribution (GPD) for modeling peaks over thresholds as in Extreme Value Theory, but casts the model in a conditional framework to allow for time-variation in the tail shape parameters. The score-driven updates used improve the expected Kullback-Leibler divergence between the model and the true data generating process on every step even if the GPD only fits approximately and the model is mis-specified, as will be the case in any finite sample. This is confirmed in simulations. Using the model, we find that Eurosystem sovereign bond purchases during the euro area sovereign debt crisis had a beneficial impact on extreme upper tail quantiles, leaning against the risk of extremely adverse market outcomes while active.
- JEL Code:
- C22,G11
- 11 February 2021
-
Working Paper Series - Issue No. 2523Details
- Abstract:
- This paper builds an unobserved components model that combines a multivariate filter approach with a Cobb-Douglas production function. This combination allows potential output estimates to incorporate more economic structure than the traditional production function approach, while retaining the ability to conduct growth accounting exercises. The model is a backward-looking state space model estimated with Bayesian methods employing the Kalman filter to jointly decompose six key observable variables (real GDP, unemployment rate, labour force participation rate, hours worked per person, a measure of core inflation and wage inflation) into trend and cyclical components. To do so, it relies on several reduced form relationships across the cyclical components, such as a wage and a price Phillips curve and an Okun's law type relationship, while it also assumes common trends for a few variables and allows for hysteresis effects. The model is estimated on aggregate euro area data with Bayesian methods. The paper finds that the resulting output gap estimates have good revision properties and reasonable forecasting performance in particular in terms of GDP and core inflation vis-a-vis a set of benchmarks.
- JEL Code:
- C32,D24,E32,E37
- 10 February 2021
-
SpeechDetails
- Subtitle:
- Speech by Fabio Panetta, Member of the Executive Board of the ECB, at a Bruegel online seminar
- 10 February 2021
-
Euro area securities issues statisticsAnnexes
- 10 February 2021
-
Euro area securities issues statistics
- 10 February 2021
-
Euro area securities issues statistics
- 9 February 2021
-
Weekly financial statementAnnexes
- 9 February 2021
-
Weekly financial statement - Commentary
- 9 February 2021
-
InterviewDetails
- Subtitle:
- Interview with Fabio Panetta, Member of the Executive Board of the ECB, conducted by Tim Bartz
- 8 February 2021
-
SpeechDetails
- Subtitle:
- Introductory statement by Christine Lagarde, President of the ECB, at the plenary session of the European Parliament
- 8 February 2021
-
Strategy review
- 8 February 2021
-
Strategy review
- 8 February 2021
-
Working Paper Series - Issue No. 2522Details
- Abstract:
- Earnings are riskier and more unequal for households born in the 1960s and 1980s than for those born in the 1940s. Despite improvements in financial conditions, younger generations are less likely to be living in their own homes than older generations at the same age. By using a life-cycle model with housing and portfolio choice that includes flexible earnings risk and aggregate asset price risk, I show that changes in earnings dynamics account for a large part of the reduction in homeownership across generations. Lower-income households find it harder to buy housing, and as a result accumulate less wealth.
- JEL Code:
- D31,E21,E24,G11,J31
- 8 February 2021
-
Working Paper Series - Issue No. 2521Details
- Abstract:
- We show that a reduction in lender of last resort (LOLR) policy uncertainty positively affects bank lending and propagates to investment and employment. We exploit a unique policy that reduced uncertainty regarding the availability of future LOLR funding for banks as a quasi-natural experiment. Using micro-level data on banks, firms and loans in Portugal, we generate cross-sectional variation in banks’ exposure to uncertainty and find that the size of the haircut subsidy - the gap between private market and central bank security valuations - plays a key role in the propagation of the shock to lending and the real economy.
- JEL Code:
- E44,E52,E58,G21,G32
- Network:
- Research Task Force (RTF)
- 8 February 2021
- 7 February 2021
-
InterviewDetails
- Subtitle:
- Interview with Christine Lagarde, President of the ECB, conducted by Marie-Pierre Gröndahl and Hervé Gattegno
- 5 February 2021
- 5 February 2021
- 5 February 2021
- 5 February 2021
- 5 February 2021
- 5 February 2021
- 4 February 2021
- 4 February 2021
- 4 February 2021
-
MFI interest rate statistics
- 4 February 2021
-
Economic Bulletin
- 4 February 2021
-
Economic Bulletin - BoxEconomic Bulletin Issue 1, 2021Details
- Abstract:
- This box analyses the developments in prices for travel-related services across items and across euro area countries. The purpose is to clarify the extent to which there are commonalities when it comes to explaining the sharp drop in travel-related services inflation.
- JEL Code:
- E32
- 4 February 2021
-
Economic Bulletin - BoxEconomic Bulletin Issue 1, 2021Details
- Abstract:
- Housing costs represent a large share of the household budget. Developments in these costs are not only linked to house prices, rent and mortgage costs but are also influenced by certain household characteristics, such as tenure status. This is due to the fact that tenants and less affluent households, for example, tend to spend a large share of their income on housing. In addition, household characteristics affect the negative relationship between homeownership and the housing burden. Households with a higher income and living in larger households are predominantly homeowners. That said, higher homeownership rates are not, in themselves, necessarily good or bad, as they can be associated with a range of both positive and negative economic outcomes.
- JEL Code:
- E31,R30
- 4 February 2021
-
Economic Bulletin - BoxEconomic Bulletin Issue 1, 2021Details
- Abstract:
- We augment the ECB-BASE model using the predictive dynamics of an SIR model in order to assess the interplay between epidemiological fundamentals, containment policies and the macroeconomy, investigating the macro impact of pandemic-related risk factors associated with a medical solution to the COVID‑19 crisis.
- JEL Code:
- E1,E3,I1
- 4 February 2021
-
Economic Bulletin - BoxEconomic Bulletin Issue 1, 2021Details
- Abstract:
- This box studies the relative impact on inflation of pandemic-induced demand and supply constraints for key advanced economies outside the euro area by using granular data on consumption expenditures and prices and a structural Bayesian Vector Autoregression (BVAR) framework. It finds that during the initial phase of the pandemic, consumer price inflation was driven more by demand-sensitive components and less by supply-sensitive ones. The structural analysis confirms a dominant role for demand shocks in the pandemic. It concludes that the impact of pandemic-related supply constraints on inflation appears limited to date. Yet, more granular analysis is needed to assess the consequences of the pandemic for the drivers of inflation.
- JEL Code:
- C11,E31,E32,O11,O40
- 3 February 2021
-
Statistics Paper Series - Issue No. 40Details
- Abstract:
- Consumer price inflation, as measured by the year-on-year increase in the Harmonised Index of Consumer Prices (HICP), is used by the European Central Bank (ECB) for assessing its monetary policy. The European Statistical System regularly introduces methodological improvements into this chain-linked price index in the linking month (December). If the outcome of such changes is a new series with a very different profile in December – either due to changed seasonality or one-off (sampling) effects – significant statistical distortions may arise when the new index series is chain-linked to the existing series. This paper explains the mechanism behind statistical distortions due to chain linking and provides some recent examples from European price statistics. Several alternative chain-linking practices, as well as recommendations for data users on how to deal with such statistical breaks in the HICP, are presented.
- JEL Code:
- C43,E31
- 3 February 2021
-
Economic Bulletin - ArticleEconomic Bulletin Issue 1, 2021Details
- Abstract:
- As part of the process of gathering information on the outlook for economic activity and prices, the European Central Bank (ECB) maintains regular contacts with non-financial companies. This gathering of business intelligence has become more structured over time and tends to be particularly valuable during exceptional periods, such as those resulting from the coronavirus (COVID-19) pandemic. Therefore, starting with this issue of the Economic Bulletin, the ECB will provide a summary of the main findings from its contacts with leading euro area businesses. This article explains how these interactions contribute to the ECB’s economic analysis and how they are organised and summarised. The main findings from the most recent exchanges with companies, which took place in early January, are summarised in Box 1.
- JEL Code:
- E2,E3,L2
- 2 February 2021
-
Weekly financial statementAnnexes
- 2 February 2021
-
Weekly financial statement - Commentary
- 2 February 2021
-
€STR Transparency on errors
- 2 February 2021
-
Economic Bulletin - BoxEconomic Bulletin Issue 1, 2021Details
- Abstract:
- This box examines the drivers of intra-country regional differences in the economic impact of the coronavirus (COVID-19), as observed in the four largest euro area economies during the initial phase of the pandemic. More specifically, it discusses how the interaction between government containment measures, sectoral structure and trade linkages helps explain the intra-country regional variations in the labour market impact of the pandemic. It finds that the different economic impact across regions cannot be explained solely by the spread of infections,a region’s economic structure is also a key determinant. Moreover, the trade relations of a region, both within and across countries, are found to be an important indirect channel through which coronavirus-related disturbances affect regional economic activity, highlighting vulnerabilities which may arise from disruptions to highly integrated EU supply chains.
- JEL Code:
- R11,F14,J40,R15
- 2 February 2021
-
Economic Bulletin - ArticleEconomic Bulletin Issue 1, 2021Details
- Abstract:
- Euro area countries have relied extensively on fiscal policy to counter the harmful impact of the coronavirus (COVID-19) pandemic on their economies. They have implemented a broad range of measures, some with an immediate budgetary impact and others, such as liquidity measures, which, in principle, are not expected to cause an immediate deterioration in the fiscal outlook. Since all euro area countries were hit by the economic shock largely through the same channels, their fiscal responses in the early stages of the crisis were similar in terms of the instruments used. Fiscal emergency packages were mostly aimed at limiting the economic fallout from containment measures through direct measures to protect firms and workers in the affected industries. Simultaneously, extensive liquidity support measures in the form of tax deferrals and State guarantees were announced to help firms particularly impacted by the containment policies to avoid liquidity shortages. In order to support the recovery, fiscal policy needs to provide targeted and mostly temporary stimulus, tailored to the specific characteristics of the crisis and countries’ fiscal positions. Government investments, complemented by the Next Generation EU package, and accompanied by appropriate structural policies, should play a major role in this respect.
- JEL Code:
- H6,H1,H5
- 1 February 2021
- 1 February 2021
-
Economic Bulletin - BoxRotation towards normality – the impact of COVID-19 vaccine-related news on global financial marketsEconomic Bulletin Issue 1, 2021Details
- Abstract:
- Using a database on vaccine probability events dating back to April 2020, this box assesses the impact of a broad range of COVID-19 vaccine-related news on global financial markets. It finds that positive vaccine news leads to a rotation back towards assets hardest hit by the pandemic, disproportionately benefits lagging economies and has a positive net effect on financial conditions.
- JEL Code:
- F30,G15
- 1 February 2021
-
Economic Bulletin - ArticleEconomic Bulletin Issue 1, 2021Details
- Abstract:
- The response to the COVID-19 outbreak with lockdowns implies both a shutdown of some markets and a severe economic downturn. Price developments have been influenced in a complex manner by different demand and supply factors, which limits the applicability of past empirical regularities in the interpretation of recent aggregate inflation developments. This article looks at this complexity and applies a component-by-component approach to analysing HICP inflation that takes into account the circumstances prevailing in individual markets. The article analyses how sub-components of euro area inflation have behaved since the onset of the pandemic. It then elaborates on the relative importance of demand and supply factors driving the disaggregated price developments and the implications for headline inflation. The article concludes with the lessons that can be learnt from this bottom-up analysis, an approach that is particularly suited to current circumstances.
- JEL Code:
- E21,E32
- 31 January 2021
-
InterviewDetails
- Subtitle:
- Interview with Philip R. Lane, Member of the Executive Board of the ECB, conducted by Markus Zydra on 26 January and published on 1 February 2021 as a shortened version in Süddeutsche Zeitung
- 31 January 2021
-
InterviewDetails
- Subtitle:
- Interview with Isabel Schnabel, Member of the Executive Board of the ECB, conducted by Klemens Kindermann on 29 January 2021 and published on 31 January 2021
- 29 January 2021
-
Working Paper Series - Issue No. 2520Details
- Abstract:
- After the announcement of the European Central Bank’s corporate quantitative easing program, non-financial corporations timed the bond market by shifting their issuance toward bonds eligible for the program. However, issuers of eligible bonds did not increase total issuance compared to other issuers; nor did they experience different economic outcomes. Instead, the announcement produced substantial spillover effects on risk premia. Credit risk premia declined, both in the corporate bond market and in the default swap market, whereas the valuation of eligible bonds did not change relative to comparable ineligible bonds. Firms took advantage of reduced risk premia by issuing riskier bond types. Using a novel and comprehensive dataset of corporate bonds in the euro area, we document how firms substituted across bond characteristics, and we find evidence of their intention to time the market. Our model indicates corporate market timing is instrumental in allowing quantitative easing to produce spillover effects.
- JEL Code:
- G32,G12,E52,E58,E44
- 29 January 2021
-
Occasional Paper Series - Issue No. 256Details
- Abstract:
- Custodians play a key but discrete role in the global financial market infrastructure. In Europe, they are licensed as “credit institutions ”, a legal requirement for European deposit-taking institutions, and therefore they face the same prudential requirements as “traditional” banks. However, their business model and risk profile are different from those of traditional banks since the core of their activity does not encompass balance sheet transformation and the associated risks.
- JEL Code:
- G15,G21,G28,L22
- 29 January 2021
-
T2S Harmonisation progress report - Issue No. 11
- 29 January 2021
-
Working Paper Series - Issue No. 2519Details
- Abstract:
- In this paper we examine the effects of limited liability on mortgage dynamics. While the literature has focused on default rates, renegotiation, or loan rates individually, we study them together as equilibrium outcomes of the strategic interaction between lenders and borrowers. We present a simple model of default and renegotiation where the degree of limited liability plays a key role in agents' strategies. We then use Fannie Mae loan performance data to test the predictions of the model. We focus on Metropolitan Statistical Areas that are crossed by a State border in order to exploit the discontinuity in regulation around the borders of States. As predicted by the model, we find that limited liability results in higher default rates and renegotiation rates. Regarding loan pricing, while the model predicts higher interest rates for limited liability loans, we find no such evidence in the Fannie Mae data. We further investigate this by using loan application data, which contains the interest rates on loans sold to private vs public investors. We find that private investors do price in the difference in ex-ante predictable default risk for limited liability loans.
- JEL Code:
- D10,E40,G21,R20,R30
- 29 January 2021
-
Monetary developments in the euro areaAnnexes
- 29 January 2021
-
Monetary developments in the euro area
- 28 January 2021
-
SpeechDetails
- Subtitle:
- Speech by Isabel Schnabel, Member of the Executive Board of the ECB, at the LSE conference on “Financial Cycles, Risk, Macroeconomic Causes and Consequences”
Annexes- 28 January 2021
-
Speech
- 28 January 2021
-
Working Paper Series - Issue No. 2518Details
- Abstract:
- International organizations (IOs) often drive policy change in member countries. Given IOs’ limited political leverage over a member country, previous research argues that IOs rely on a combination of hard pressures (i.e., conditionality) and soft pressures (i.e., socialization) to attain their political goals. Expanding this literature, we hypothesize that IOs can enhance their political leverage through loan conditions aimed at politically empowering ‘sympathetic interlocutors’. Studying this mechanism in the context of the International Monetary Fund (IMF), we argue that through prescribing structural loan conditions on central banks (CBI conditionality), the IMF empowers monetary authorities that can serve as a veto player to the government. Relying on a dataset including up to 124 countries between 1980 and 2012, we find that the IMF’s CBI conditionality correlates to countries with fewer checks and balances, a less independent central bank, and where the government relies more heavily on the monetization of public debt.
- JEL Code:
- E52,E58,F5
- 28 January 2021
-
Occasional Paper Series - Issue No. 255Details
- Abstract:
- In response to the economic fallout from the coronavirus (COVID-19) pandemic, the European Council agreed on the Next Generation EU (NGEU) instrument. NGEU allows the European Commission to issue debt to finance grants and loans to EU Member States, with the disbursement of funds intended to be weighted towards the countries most affected by the crisis. This paper assesses the macroeconomic impact on the euro area of different uses of NGEU, using a large dynamic stochastic general equilibrium (DSGE) model of the euro area and global economy (EAGLE) that has been adapted to reflect the modalities of the NGEU instrument. Three uses of NGEU loans and grants are explored: (i) productive public investment, (ii) unproductive government spending, and (iii) replacing or repaying existing sovereign debt. The EAGLE results are cross-checked with a semi-structural model (ECB-BASE) and with the basic model elasticities (BMEs) of the forecasting models in use in the national central banks of the Eurosystem.
- JEL Code:
- C54,E62,E65,F54,F47
- 28 January 2021
-
Euro area economic and financial developments by institutional sector (full)
- 27 January 2021
-
InterviewDetails
- Subtitle:
- Interview with Philip R. Lane, Member of the Executive Board of the ECB, conducted by Elena Laskari on 26 January 2021
- 27 January 2021
-
Working Paper Series - Issue No. 2517Details
- Abstract:
- This paper proposes an approach to estimate the impact of adverse climatic events on the profitability of small European banks (LSIs). By considering river flooding phenomena, we construct a unique database matching the information on location, frequency and severity of floods with the location and balance sheet data of institutions mainly operating in the areas where they are headquartered (territorial LSIs). We compare the performance of territorial LSIs across regions at low and high flooding risk and test for the “core lending channel” hypothesis, whereby lending to the real economy is a catalyst of physical risks. Results show that an adverse event dropping loans to households and non-financial corporations by one percentage point (pp) of total assets entails a decrease in the Return on Assets (ROA) of territorial LSIs in riskier areas by 0.01pps (~3.1%). Moreover, if all territorial LSIs were located in riskier areas, one bank out of two would report an average ROA between 0.0001 and 0.52 percentage points lower than what observed.
- JEL Code:
- C33,G21,Q54
- 27 January 2021
-
Working Paper Series - Issue No. 2516Details
- Abstract:
- This paper proposes a new methodology based on textual analysis to forecast U.S. recessions. Specifically, the paper develops an index in the spirit of Baker et al. (2016) and Caldara and Iacoviello (2018) which tracks developments in U.S. real activity. When used in a standard recession probability model, the index outperforms the yield curve based forecast, a standard method to forecast recessions, at medium horizons, up to 8 months. Moreover, the index contains information not included in yield data that are useful to understand recession episodes. When included as an additional control to the slope of the yield curve, it improves the forecast accuracy by 5% to 30% depending on the horizon. These results are stable to a number of different robustness checks, including changes to the estimation method, the definition of recessions and controlling for asset purchases by major central banks. Yield and textual analysis data also outperform other popular leading indicators for the U.S. business cycle such as PMIs, consumers' surveys or employment data.
- JEL Code:
- E17,E47,E37,C25,C53
- 27 January 2021
-
Research Bulletin - Issue No. 80Details
- Abstract:
- Episodes such as the current coronavirus (COVID-19) crisis might lead to a significant rise in borrower defaults and, consequently, weakness in the banking sector. Having well-capitalised banks makes the financial system more resilient to such episodes. We assess how much capital would be optimal for banks to hold, taking into consideration the risk of banking crises driven by borrower defaults (which we term “twin default crises”).
- JEL Code:
- G01,G28
- Network:
- Research Task Force (RTF)
- 26 January 2021
-
Weekly financial statementAnnexes
- 26 January 2021
-
Weekly financial statement - Commentary
- 26 January 2021
-
Working Paper Series - Issue No. 2515Details
- Abstract:
- We analyse the impact of the Liquidity Coverage Ratio (LCR) on the demand for central bank reserves in the euro area with difference-in-differences estimation techniques. Using a novel dataset and an identification strategy that exploits the cross-country heterogeneity in the regulatory treatment of reserves for LCR purposes prior to the announcement of a harmonised euro area standard as a quasi-natural experiment, we find evidence that points to LCR-induced demand for reserves. Specifically, our results suggest that banks with low LCRs relative to peers increased their central bank reserve holdings as a result of the LCR regulation. Our findings have economically meaningful implications for the operational framework of monetary policy and imply that the Eurosystem’s balance sheet may need to remain larger than it was prior to the financial crisis and the associated introduction of new liquidity regulation.
- JEL Code:
- C23,E52,G28
- 26 January 2021
-
Working Paper Series - Issue No. 2514Details
- Abstract:
- How much of the heterogeneity in bank loan pricing is explained by disparities in banks’ attitude towards risk? The answer to this question is not simple because there are only very weak proxies for gauging the degree of a bank’s risk aversion. We handle this constraint by means of a novel econometric approach that allows us to disentangle the amount of risk faced by banks and the price they charge for holding that risk. Some of our results are aligned with previous studies and confirm that disparities in market power, banks’ funding costs, and banks’ funding risks are reflected in bank lending rates. However, our new modelling framework reveals that the heterogeneity in bank lending rates is also a reflection of the non-negligible disparities in banks’ risk aversion.
- JEL Code:
- C23,E58,G21
- 25 January 2021
-
SpeechDetails
- Subtitle:
- Panel contribution by Philip R. Lane, Member of the Executive Board of the ECB, at the Lámfalussy Lectures E-Conference 2021 organised by the Magyar Nemzeti Bank
- 25 January 2021
-
SpeechDetails
- Subtitle:
- Introductory statement by Frank Elderson, Member of the Executive Board of the ECB, at the ECON Committee of the European Parliament
- 25 January 2021
-
SpeechDetails
- Subtitle:
- Keynote speech by Fabio Panetta, Member of the Executive Board of the ECB, at the 50th anniversary of the Associazione Italiana per l’Analisi Finanziaria (by videoconference)
- 25 January 2021
-
Working Paper Series - Issue No. 2513Details
- Abstract:
- We build a new empirical model to estimate the global impact of an increase in the volatility of US monetary policy shocks. Specifically, we admit time-varying variances of local structural shocks from a stochastic volatility specification. By allowing for rich dynamic interaction between the endogenous variables and time-varying volatility in the global setting, we find that US interest rate uncertainty not only drives local output and inflation volatility, but also causes declines in output, inflation, and the interest rate. Moreover, we document strong global impacts, making the world move in a very synchronous way. Crucially, spillback effects are found to be significant even for the US economy.
- JEL Code:
- C32,C54,E52,E58,F44
- 25 January 2021
-
Working Paper Series - Issue No. 2512Details
- Abstract:
- A decision maker tests whether the gradient of the loss function evaluated at a judgmental decision is zero. If the test does not reject, the action is the judgmental decision. If the test rejects, the action sets the gradient equal to the boundary of the rejection region. This statistical decision rule is admissible and conditions on the sample realization. The confidence level reflects the decision maker’s aversion to statistical uncertainty. The decision rule is applied to a problem of asset allocation.
- JEL Code:
- C1,C11,C12,C13,D81
- 25 January 2021
-
Press release
- 25 January 2021
-
SpeechDetails
- Subtitle:
- Keynote speech by Christine Lagarde, President of the ECB, at the ILF conference on Green Banking and Green Central Banking
- 25 January 2021
- 22 January 2021
- 22 January 2021
- 22 January 2021
- 22 January 2021
- 22 January 2021
- 22 January 2021
- 22 January 2021
-
Governing Council decisions - Other decisions
- 22 January 2021
-
Working Paper Series - Issue No. 2511Details
- Abstract:
- We evaluate the role of insider ownership in shaping banks’ equity issuances in response to the global financial crisis. We construct a unique dataset on the ownership structure of U.S. banks and their equity issuances and discover that greater insider ownership leads to less equity issuances. Several tests are consistent with the view that bank insiders are reluctant to reduce their private benefits of control by diluting their ownership through equity issuances. Given the connection between bank equity and lending, the results stress that ownership structure can shape the resilience of banks—and hence the entire economy—to aggregate shocks.
- JEL Code:
- G32,G21,G28
- 22 January 2021
-
Occasional Paper Series - Issue No. 254Details
- Abstract:
- The cost of equity for banks equates to the compensation that market participants demand for investing in and holding banks’ equity, and has important implications for the transmission of monetary policy and for financial stability. Notwithstanding its importance, the cost of equity is unobservable and therefore needs to be estimated. This occasional paper provides estimates of the cost of equity for listed and unlisted euro area banks using a three-step methodology. In the first step, ten different models are estimated. In the second step, the models’ results are combined applying an equal-weighting procedure. In the third step, the combined costs of equity for individual banks are aggregated at the euro area level and according to banks’ business models. The results suggest that, since the Great Financial Crisis of 2007-08, the premia that investors demand to compensate them for the risk they bear when financing banks’ equity has been persistently higher than the return on equity (ROE) generated by banks. We show that our estimates of cost of equity have plausible relationships to banks’ fundamentals. The cost of equity tends to be higher for banks that are riskier (higher non-performing loan ratios), less efficient (higher cost-to-income ratio), and with more unstable funding sources (higher relative reliance on interbank deposits). Finally, we use bank fundamentals to estimate the cost of equity for unlisted banks. In general, unlisted banks are found to have a somewhat lower cost of equity compared to listed banks, with business model characteristics accounting for part of the estimated difference.
- JEL Code:
- G20,G21,E44,G1
- 22 January 2021
-
Press releaseRelated
- 22 January 2021
-
Survey of Professional Forecasters
- 22 January 2021
-
Survey of Professional ForecastersAnnexes
- -
-
Survey of Professional Forecasters
Related- 22 January 2021
- 22 January 2021
- 21 January 2021
-
Monetary policy statementDetails
- Subtitle:
- Christine Lagarde, President of the ECB,
Luis de Guindos, Vice-President of the ECB
- 21 January 2021
-
Monetary policy decision
- 19 January 2021
-
Weekly financial statementAnnexes
- 19 January 2021
-
Weekly financial statement - Commentary
- 19 January 2021
-
Euro area bank lending survey - Issue No. 2020Annexes
- 19 January 2021
-
Euro area bank lending survey - Annex
Related- 19 January 2021
-
Press release
- 19 January 2021
-
Balance of payments (monthly)
- 19 January 2021
-
Press releaseRelated
- 19 January 2021
-
Euro area bank lending survey - Issue No. 2020
- 18 January 2021
- 14 January 2021
-
Monetary policy account
- 13 January 2021
- 13 January 2021
-
Occasional Paper Series - Issue No. 253Details
- Abstract:
- In order to understand why there is a continuous increase in euro banknote circulation even though the use of cash for transactions is decreasing in the euro area – a phenomenon known as the paradox of banknotes – the members of the Overseas workstream of the Eurosystem Research Network on Cash (EURECA) have conducted a study on the foreign demand for euro banknotes. The results of this study are based on desk research using data collected in the Eurosystem and from other organisations, and using both proven and innovative techniques.
- JEL Code:
- E41,E47,E49,E59,F24
- Network:
- Eurosystem Research Network on Cash (EURECA)
- 13 January 2021
-
Euro area securities issues statisticsAnnexes
- 13 January 2021
-
Euro area securities issues statistics
- 13 January 2021
-
Euro area securities issues statistics
- 12 January 2021
-
Weekly financial statementAnnexes
- 12 January 2021
-
Weekly financial statement - Commentary
- 12 January 2021
-
Euro area economic and financial developments by institutional sector (early)
- 12 January 2021
-
Balance of payments (quarterly)
- 12 January 2021
-
InterviewDetails
- Subtitle:
- Interview with Isabel Schnabel, Member of the Executive Board of the ECB, conducted by Andras Szigètvari on 7 January 2021 und published on 12 January 2021
- 12 January 2021
-
Research Bulletin - Issue No. 79Details
- Abstract:
- Economists have argued that when interest rates set by policymakers cannot go any lower, the economy can be stabilised if consumers expect the rate of inflation to increase. Yet, the evidence for this stabilising effect has been very mixed. In this article we review new evidence from a monthly survey of over 25,000 individual consumers across the euro area showing that consumers are indeed more ready to spend if they expect inflation to be higher in the future. While generalised in the population, the stabilising effect is stronger when nominal interest rates are constrained at the lower bound.
- JEL Code:
- D12,D84,E21,E31,E52
- 11 January 2021
-
Working Paper Series - Issue No. 2510Details
- Abstract:
- This paper develops Bayesian econometric methods for posterior inference in non-parametric mixed frequency VARs using additive regression trees. We argue that regression tree models are ideally suited for macroeconomic nowcasting in the face of extreme observations, for instance those produced by the COVID-19 pandemic of 2020. This is due to their flexibility and ability to model outliers. In an application involving four major euro area countries, we find substantial improvements in nowcasting performance relative to a linear mixed frequency VAR.
- JEL Code:
- C11,C32,C53,E37
- 8 January 2021
- 7 January 2021
-
Euro money market statistics
- 7 January 2021
-
Economic Bulletin
- 7 January 2021
-
Economic Bulletin - BoxEconomic Bulletin Issue 8, 2020Details
- Abstract:
- This box examines the fiscal policy recommendations addressed to the euro area countries against the background of the COVID-19 crisis.
- JEL Code:
- E62,H6
- 7 January 2021
-
Economic Bulletin - BoxEconomic Bulletin Issue 8, 2020Details
- Abstract:
- The coronavirus (COVID-19) pandemic and the lockdown measures to contain its spread caused large cumulated losses in euro area domestic demand in the first half of 2020, with a rebound in the third quarter of the year, according to the standard expenditure-based breakdown of GDP. However, an adjustment for import intensities derived from input-output data shows that external factors have also contributed significantly to growth dynamics in 2020. While an extended analysis based on ratios of sectoral imports to value added as a proxy suggests that import intensities may have, in aggregate, risen somewhat in the current crisis, this does not have a significant impact on the alternative, import-adjusted GDP breakdown for 2020.
- JEL Code:
- E21,E23,E32
- 7 January 2021
-
Economic Bulletin - BoxEconomic Bulletin Issue 8, 2020Details
- Abstract:
- This box describes the ECB’s monetary policy operations during the fifth and sixth reserve maintenance periods from 22 July to 3 November 2020.
- JEL Code:
- E40,E52,E58
- 7 January 2021
-
Economic Bulletin - BoxEconomic Bulletin Issue 8, 2020Details
- Abstract:
- This box aims to assess the long-term implications of past crises for the global economy’s potential output and to discuss potential scarring effects of the coronavirus (COVID-19) pandemic. Starting with a review of past crises and the transmission channels through which potential output is affected, it concludes that the pandemic could leave scarring effects on the global economy, with labour supply likely to be initially hit the most. However, effects on the capital stock are potentially more relevant over the medium to long term.
- JEL Code:
- C23,E22,E23,E24,E32,O11,O40
- 6 January 2021
-
Weekly financial statementAnnexes
- 6 January 2021
-
Weekly financial statement - Commentary
- 6 January 2021
-
MFI interest rate statistics
- 6 January 2021
-
Economic Bulletin - BoxEconomic Bulletin Issue 8, 2020Details
- Abstract:
- Can the indicator of negotiated wage rates play an especially important role in assessing and forecasting wage dynamics at the current juncture? While the data on negotiated wages are available on a more timely basis, negotiated wage growth tends to only react with some lag to changes in labour market conditions, owing to the nature of the negotiation process, and the indicator is currently still dominated by wage agreements agreed prior to the pandemic. The main effects of the pandemic on negotiated wage growth are likely to become visible only from 2021 – when a substantial share of wage contracts in euro area countries is due to be renegotiated. Wage drift developments, in conjunction with information on hours worked and unemployment, can provide some indications regarding the environment in which these negotiations will take place. The availability of more granular data, for example on negotiated wage growth in different sectors, would be very helpful in analysing euro area wage developments in more detail.
- JEL Code:
- H24,J30,J31
- 6 January 2021
-
Economic Bulletin - ArticleEconomic Bulletin Issue 8, 2020Details
- Abstract:
- Digitalisation – the diffusion of digital technologies, leading to a digital economy is “virtually everywhere”. It transforms economies, making it an important issue from a central banking perspective. Some of the key effects of digitalisation relevant to monetary policy relate to output and productivity, labour markets, wages and prices. This article summarises and updates the evidence on the euro area and the EU digital economy. This article also takes a closer look at the impact of the coronavirus (COVID-19) pandemic on the digital economy, both in the short term and beyond.
- JEL Code:
- E22,E24,E31,E32,O33,O52
- 6 January 2021
-
Economic Bulletin - ArticleEconomic Bulletin Issue 8, 2020Details
- Abstract:
- This article analyses labour market developments in the euro area since the onset of the coronavirus (COVID-19) pandemic. Total hours worked declined sharply in the first half of 2020. However, employment and unemployment reacted only weakly to the marked fall in GDP, as many workers remained employed under job retention schemes. These contributed to a fall in compensation per employee and an increase in compensation per hour worked. Participation in the labour force also dropped substantially, more than offsetting the increase observed since mid-2013. An analysis of the decomposition of labour market shocks via a sign-restricted structural vector-autoregressive model shows that both supply and demand shocks contributed to the decline in total hours worked. High-frequency indicators on hiring rates and job postings have declined sharply since April and continue to indicate a depressed level of labour demand. However, employment and hours worked recovered somewhat in the third quarter. Nonetheless, the COVID-19 pandemic is having a heterogeneous impact on employment across euro area countries and there is the risk of a further increase in geographic divergence in euro area labour markets. Temporary employees, the young and workers with low levels of education were the most affected, while teleworking may have played a role in supporting employment and hours worked for some workers in certain sectors. Activity sectors such as trade and transport and recreation activities have been disproportionately affected, with the largest decreases in hours worked. However, it is too early to assess the extent to which the pandemic will affect the need for labour reallocation across sectors, tasks and occupations.
- JEL Code:
- E24,E65
- 5 January 2021
-
Statistics Paper Series - Issue No. 39Details
- Abstract:
- This study examines interviewer effects on household non-response in the three waves of the Household Finance and Consumption Survey (HFCS) in Austria. We exploit the rare opportunity to combine this wealth survey data, accompanied by a large set of paradata on all households including non-respondents, with two other sets of data, namely (i) an administrative dataset on income and (ii) a survey on interviewer characteristics. These characteristics include measures of the social background, income and wealth, and personality traits of the interviewers. Our multilevel benchmark model shows that the proportion of the variation in response behaviour that can be explained at the interviewer level has decreased from about one-third in the first wave of the HFCS to about 7% in the third wave. Using further specifications of our multilevel model we find that the following interviewer characteristics are positively related to household response: having a university degree, being married, being a homeowner and having a less open personality. At the same time, we find a highly significant negative relationship between survey participation and mean wage in the household’s municipality
- JEL Code:
- X01,X02,X03
- 5 January 2021
-
Euro area pension fund statisticsAnnexes
- 5 January 2021
-
Euro area pension fund statistics
- 5 January 2021
-
Monetary developments in the euro areaAnnexes
- 5 January 2021
-
Monetary developments in the euro area
- 5 January 2021
-
Economic Bulletin - BoxEconomic Bulletin Issue 8, 2020Details
- Abstract:
- The exceptional contraction in economic activity induced by the outbreak of the coronavirus (COVID-19) has warranted an update of the standard toolkit used to forecast euro area real GDP in real time. This box describes the adjustments and the additions to the standard toolkit developed by ECB staff to account for the dramatic change in statistical and economic relationships due to COVID-19. The use of each individual tool is subject to a considerable degree of judgment as to the type of adjustment needed to best capture the sharp movements in economic activity. These tools have provided helpful insights into forecasting euro area real GDP in real time, even if they imply some shortcomings.
- JEL Code:
- C18,E27
- 5 January 2021
-
Economic Bulletin - ArticleEconomic Bulletin Issue 8, 2020Details
- Abstract:
- The Bulgarian lev and the Croatian kuna were included in the exchange rate mechanism (ERM II) on 10 July 2020. This marks a milestone towards further enlargement of the euro area. The process unfolded along a roadmap agreed by the various ERM II parties, which reflects the lessons learned from the past and the creation of banking union, as well as a careful assessment of country-specific strengths and vulnerabilities. First, this article briefly reviews the history, main features and procedures of ERM II. It then argues on the basis of quantitative evidence that the process of euro adoption may induce a regime shift when a country joins ERM II. This shift may alter the economic incentives of both domestic and foreign investors and the authorities of the Member State concerned, with important policy implications. For this reason, countries need sound policies, governance and institutions in order to allocate international financial inflows and domestic credit efficiently. They must also address risks with adequate macroeconomic, macroprudential, supervisory and structural measures. Drawing on this analysis, the third part of the article explains the rationale for ERM II participation and the roadmap towards it that has been successfully implemented for Bulgaria and Croatia. This includes the completion of several policy measures before joining ERM II, as well as post-entry policy commitments made by the Bulgarian and Croatian authorities. The article concludes by highlighting the way ahead and challenges faced by the two countries on the path towards euro adoption.
- JEL Code:
- E42,F02,F31,F33,F45
- 4 January 2021
-
Survey of Monetary Analysts
- 4 January 2021
-
Economic Bulletin - BoxEconomic Bulletin Issue 8, 2020Details
- Abstract:
- This box summarises the findings of an ad hoc ECB survey of leading euro area companies looking at the long-term effects of the coronavirus (COVID-19) pandemic on the economy. The responses indicate that companies see the pandemic having a long-term impact both on supply and demand. The pandemic has required firms to implement changes that they consider will make their business more efficient and resilient in the long term and help cope with changes in the structure of demand and consumer behaviour. Almost all the companies that responded said they have accelerated the adoption of digital technologies. They also expect that significantly increased use of the “home office” will continue, which they do not see as negatively impacting productivity. Most respondents expect productivity to increase as a long-term consequence of the pandemic,the other side of this coin, however, is lower employment, given the expectation of protracted reduced demand in some sectors.
- 4 January 2021
-
Economic Bulletin - BoxEconomic Bulletin Issue 8, 2020Details
- Abstract:
- This box assesses the implications of the coronavirus (COVID-19) pandemic for the euro area tourism sector, trade in travel services and consumption of non-residents. Declining mobility during the pandemic has led to a slump in trade in services and tourism. As a result, the drop in non-resident consumption has acted as a shock amplification mechanism in countries exporting tourism services, i.e. countries which receive a lot of tourists, and as a shock absorption mechanism in countries importing tourism services. The partial recovery of tourism services observed during the summer months was mostly generated by domestic tourism substituting foreign tourism. The reintroduction of travel restrictions in October will likely imply that this substitution will continue to affect the dynamics of tourism services. High-frequency data on tourism, travel and services production point to a renewed overall deterioration of tourism services in the final quarter of 2020.
- JEL Code:
- E01,E21,F14,Z3
- 29 December 2020
- 29 December 2020
- 29 December 2020
- 29 December 2020
- 29 December 2020
- 29 December 2020
- 29 December 2020
- 29 December 2020
-
Weekly financial statementAnnexes
- 29 December 2020
-
Weekly financial statement - Commentary
- 22 December 2020
-
Weekly financial statementAnnexes
- 22 December 2020
-
Weekly financial statement - Commentary
- 21 December 2020
-
Working Paper Series - Issue No. 2509Details
- Abstract:
- This paper studies the effect of deep recessions on intergenerational inequality by quantifying the welfare effects on households at different phases of the life cycle. Deep recessionary episodes are characterized by large declines in the prices of real and financial assets and in employment. The former levies high welfare costs on older households who own financial wealth, the latter determines labour income losses and destroys the human capital of younger cohorts, lowering their productivity. The paper extends previous analyses in the literature by including permanent labour income losses in an OLG model calibrated to match the Great Recession. The analysis shows that younger households lose more than double of all other living cohorts, as younger household become unemployed and experience a decline in their future income. The dynamics of households’ consumption and portfolio composition between 2007 and 2013 in the US are consistent with the predictions of the model.
- JEL Code:
- E21,D31,D58,D63,D91
- 18 December 2020
- 18 December 2020
-
Working Paper Series - Issue No. 2508Details
- Abstract:
- We study the effects of the diversification of funding sources on the financing conditions for firms. We exploit a regulatory reform which took place in Italy in 2012, i.e., the introduction of “minibonds”, which opened a new market-based funding opportunity for unlisted firms. Using the Italian Credit Register, we investigate the impact of minibond issuance on bank credit conditions for issuer firms, both at the firm-bank and firm level. We compare new loans granted to issuer firms with new loans concurrently granted to similar non-issuer firms. We find that issuer firms obtain lower interest rates on bank loans of the same maturity than non-issuer firms, suggesting an improvement in their bargaining power with banks. In addition, issuer firms reduce the amount of used bank credit but increase the overall amount of available external funds, pointing to a substitution with bank credit and to a diversification of corporate funding sources. Studying their ex-post performance, we find that issuer firms expand their total assets and fixed assets, and also raise their leverage.
- JEL Code:
- G21,G23,G32,G38
- 18 December 2020
-
Working Paper Series - Issue No. 2507Details
- Abstract:
- Using new panel data from a representative survey of households in the six largest euro area economies, the paper estimates the impact of the Covid-19 crisis on consumption. The panel provides, each month, household-specific indicators of the concern about finances due to Covid-19 from the first peak of the pandemic until October 2020. The results show that this concern causes a significant reduction in non-durable consumption. The paper also explores the potential impact on consumption of government interventions and of another wave of Covid-19, using household-level consumption adjustments to scenarios that involve positive and negative income shocks. Fears of the financial consequences of the pandemic induce a significant reduction in the marginal propensity to consume, an effect consistent with models of precautionary saving and liquidity constraints. The results are robust to endogeneity concerns through use of panel fixed effects and partial identification methods, which account also for time-varying unobservable variables, and provide informative identification regions of the average treatment effect of the concern for Covid-19 under weak assumptions.
- JEL Code:
- D12,D81,E21,G51,H31
- 18 December 2020
-
InterviewDetails
- Subtitle:
- Interview on Twitter with Isabel Schnabel, Member of the Executive Board of the ECB, conducted and published on 17 December 2020
- 18 December 2020
-
Balance of payments (monthly)
- 17 December 2020
-
SpeechDetails
- Subtitle:
- Presentation by Isabel Schnabel, Member of the Executive Board of the ECB, Exchange of views with German economists on the coronavirus (COVID-19), organised by German Ministry of Finance
- 17 December 2020
-
Working Paper Series - Issue No. 2506Details
- Abstract:
- Beside large capital flows, euro area financial centres feature important and growing trade surpluses. We investigate the composition of their gross trade flows and disentangle (i) domestic and foreign production content that is (ii) directly traded with final absorbing economies or embedded in intermediates that are carried to final destination by partner countries. This accounting exercise uncovers that foreign production transiting through their borders accounts for most of the surpluses of financial centres but also that the net surplus in domestic value added traded directly with final consumers is twice as large as in other euro area economies. MNEs allocate the value created globally to financial centres. They do so through transfer pricing practices which undermine the correct representation of the external position of these countries with a bearing also on the external position of the euro area. Their participation in production chains also appears oddly large. When we replace the official trade statistics with predictions based on the gravity law of trade, the surpluses of main euro area financial centres disappear.
- JEL Code:
- F14,F23,F40
- 17 December 2020
-
Working Paper Series - Issue No. 2505Details
- Abstract:
- This paper develops a novel indicator of global economic activity, the GEA Tracker, which is based on commodity prices selected recursively through a genetic algorithm. The GEA Tracker allows for daily real-time knowledge of international business conditions using a minimum amount of information. We find that the GEA Tracker outperforms its competitors in forecasting stock returns, especially in emerging markets, and in predicting standard indicators of international business conditions. We show that an investor would have inexorably profited from using the forecasts provided by the GEA Tracker to weight a portfolio. Finally, the GEA Tracker allows us to present the daily evolution of global economic activity during the COVID-19 pandemic.
- JEL Code:
- F44,G17,Q02
- 16 December 2020
-
SpeechDetails
- Subtitle:
- Speech by Isabel Schnabel, Member of the Executive Board of the ECB, as part of the seminar series “Havarie Europa. Zur Pathogenese europäischer Gegenwarten” at the Hamburg Institute for Social Research (Hamburger Institut für Sozialforschung)
Annexes- 16 December 2020
-
Speech
- 16 December 2020
-
Working Paper Series - Issue No. 2504Details
- Abstract:
- We document that there are strong complementarities between monetary policy and macroprudential policy in shaping the evolution of bank credit. We use a unique loan-level dataset comprising multiple credit registers from several European countries and different types of loans, including corporate loans, mortgages and consumer credit. We merge this rich information with borrower and bank-level characteristics and with indicators summarising macroprudential and monetary policy actions. We find that monetary policy easing increases both bank lending and lending to riskier borrowers, especially when there is a more accommodative macroprudential environment. These effects are stronger for less capitalised banks. Results apply to both household and firm lending, but they are stronger for consumer and corporate loans than for mortgages. Finally, for firms, the overall increase in bank lending induced by an accommodative policy mix is stronger for more (ex ante) productive firms than firms with high ex ante credit risk, except for banks with low capital.
- JEL Code:
- E51,E52,E58,G21,G28
- Network:
- Research Task Force (RTF)
- 16 December 2020
-
SpeechDetails
- Subtitle:
- Introductory remarks by Fabio Panetta, Member of the Executive Board of the ECB, at the fifth meeting of the Euro Cyber Resilience Board for pan-European Financial Infrastructures
- 15 December 2020
-
SpeechDetails
- Subtitle:
- Presentation by Philip R. Lane, Member of the Executive Board of the ECB, at the ECB legal colloquium on Post-Pandemic Economic Governance
- 15 December 2020
-
Weekly financial statementAnnexes
- 15 December 2020
-
Weekly financial statement - Commentary
- 15 December 2020
-
Working Paper Series - Issue No. 2503Details
- Abstract:
- In this paper we provide evidence on the existence of short-run trade diversion effects towards third countries as a consequence of tariff shocks. We exploit sudden policy changes in the context of the trade dispute between the US and China. Based on a data set covering monthly product-level information on US imports from 30 countries for the period January 2016 until May 2019, we employ a difference-in-differences estimation framework. Doing so, we (1) can confirm previous findings showing a strong negative direct effect of US tariffs on US imports from China, but (2) do not find evidence for significant short-run trade diversion effects towards third countries. This latter finding holds for product and country subgroups as well as for a variety of robustness checks.
- JEL Code:
- F13,F14,F61
- 15 December 2020
-
Working Paper Series - Issue No. 2502Details
- Abstract:
- Systemic risk in the banking sector is usually associated with long periods of economic downturn and very large social costs. On one hand, shocks coming from correlated exposures towards the real economy may induce correlation in banks' default probabilities thereby increasing the likelihood for systemic-tail events like the 2008 Great Financial Crisis. On the other hand, financial contagion also plays an important role in generating large-scale market failures, amplifying the initial shocks coming from the real economy. To study the sources of these rare phenomena, we propose a new definition of systemic risk (i.e. the probability of a large number of banks going into distress simultaneously) and thus we develop a multilayer microstructural model to study empirically the determinants of systemic risk. The model is then calibrated on the most comprehensive granular dataset for the euro area banking sector, capturing roughly 96% or EUR 23.2 trillion of euro area banks' total assets over the period 2014-2018. The output of the model decompose and quantify the sources of systemic risk showing that correlated economic shocks, financial contagion mechanisms, and their interaction are the main sources of systemic events. The results obtained with the simulation engine resemble common market-based systemic risk indicators and empirically corroborate findings from existing literature. This framework gives regulators and central bankers a tool to study systemic risk and its developments, pointing out that systemic events and banks’ idiosyncratic defaults have different drivers, hence implying different policy responses.
- JEL Code:
- D85,G17,G33,L14
- 15 December 2020
-
Research Bulletin - Issue No. 78Details
- Abstract:
- When high-frequency trading firms compete, does stock market liquidity deteriorate? I argue that the answer is yes. High-frequency trading competition may impact stock market liquidity via two channels. First, more competition is accompanied by more high-frequency trading and larger trading volumes, which improve market liquidity. Second, more competition may mean that high-frequency traders adapt their trading strategies and engage in more speculative trades, which harms market liquidity. Since these two channels have the opposite effects on market liquidity, it is important to disentangle the effects of competition from those of a mere increase in the number/volume of high-frequency trading transactions. In the analysis, I aim to do precisely this, by using an exogenous event which changed the intensity of high-frequency competition for some stocks but not for others. I find that otherwise similar stocks subject to more high-frequency trading competition become less liquid.
- JEL Code:
- G23,D4
- 14 December 2020
-
SpeechDetails
- Subtitle:
- Welcome address by Isabel Schnabel, Member of the Executive Board of the ECB, at the third roundtable on euro risk-free rates
- 14 December 2020
-
Working Paper Series - Issue No. 2501Details
- Abstract:
- We compare direct forecasts of HICP and HICP excluding energy and food in the euro area and five member countries to aggregated forecasts of their main components from large Bayesian VARs with a shared set of predictors. We focus on conditional point and density forecasts, in line with forecasting practices at many policy institutions. Our main findings are that point forecasts perform similarly using both approaches, whereas directly forecasting aggregate indices tends to yield better density forecasts. In the aftermath of the Great Financial Crisis, relative forecasting performance was typically only affected temporarily. Inflation forecasts made by Eurosystem/ECB staff perform similarly or slightly better than those from our models for the euro area.
- JEL Code:
- C11,C32,C53,E37
- 14 December 2020
-
Working Paper Series - Issue No. 2500Details
- Abstract:
- We study the effects of a temporary Green QE, defined as a policy that temporarily tilts the central bank’s balance sheet toward green bonds, i.e. bonds issued by firms in non-polluting sectors. To this purpose, we merge a standard DSGE framework with an environmental model. In our model, detrimental emissions produced by the brown sector increase the stock of pollution. We find that the imperfect substitutability between green and brown bonds is a necessary condition for the effectiveness of Green QE. Under the assumption of imperfect substitutability, we point out the following results. A temporary Green QE is an effective tool in mitigating detrimental emissions. However, Green QE has limited effects in reducing the stock of pollution, if pollutants are slow-moving variables such as atmospheric carbon. The welfare gains of Green QE are positive but small. Welfare gains increase if the flow of emissions negatively affects also the utility of households.
- JEL Code:
- E52,E58,Q54
- 14 December 2020
-
SpeechDetails
- Subtitle:
- Speech by Fabio Panetta, Member of the Executive Board of the ECB, at the Rome Investment Forum 2020
- 11 December 2020
-
Governing Council decisions - Other decisions
- 11 December 2020
-
Working Paper Series - Issue No. 2499Details
- Abstract:
- We provide a simple and tractable accounting-based stress-testing framework to assess loss dynamics in the banking sector, in a context of leverage targeting. Contagion can occur through direct interbank exposures, and indirect exposures due to overlapping portfolios with the associated price dynamics via fire sales. We apply the framework to three granular proprietary ECB datasets, including an interbank network of 26 large euro area banks as well as their overlapping portfolios of loans, derivatives and securities. A 5 percent shock to the price of assets held in the trading book leads to an initial loss of 30 percent of system equity and an additional loss of 1.3 percent due to fire sales spillovers. Direct interbank contagion is negligible in our analysis. Our findings underscore the importance of accurately estimating the price effects of fire sales.
- JEL Code:
- C63,G01,G18,G21
- 11 December 2020
-
Working Paper Series - Issue No. 2498Details
- Abstract:
- I study macro-prudential policy intervention in economies with secularly low interest rates. Intervention boosts risk-free real interest rates unintentionally, simply as a by-product of containing systemic risk in financial markets. Thus, intervention also boosts the natural rate of return in particular (i.e., the equilibrium risk-free rate that is consistent with inflation on target and production at full capacity). These results point to a novel complementarity between financial stability and macroeconomic stabilization. Complementary is sufficiently strong to generate a divine coincidence if the natural rate is secularly low, but not too low.
- JEL Code:
- E31,E32,E44
- Network:
- Research Task Force (RTF)
- 11 December 2020
-
€STR Annual Methodology Review - Issue No. 2020
- 10 December 2020
-
Macroeconomic projections for the euro area - Issue No. 2020Annexes
- 10 December 2020
-
Macroeconomic projections for the euro area
- 28 December 2020
- 10 December 2020
- 10 December 2020
- 10 December 2020
-
Monetary policy statementDetails
- Subtitle:
- Christine Lagarde, President of the ECB,Luis de Guindos, Vice-President of the ECB
- 10 December 2020
-
Monetary policy decision
- 10 December 2020
-
Euro area securities issues statisticsAnnexes
- 10 December 2020
-
Euro area securities issues statistics
- 10 December 2020
-
Euro area securities issues statistics
- 8 December 2020
-
Weekly financial statementAnnexes
- 8 December 2020
-
Weekly financial statement - Commentary
- 8 December 2020
-
Press release
- 2 December 2020
-
InterviewDetails
- Subtitle:
- Interview with Philip R. Lane, Member of the Executive Board of the ECB, conducted by Balázs Korányi on 1 December 2020
- 2 December 2020
-
Occasional Paper Series - Issue No. 252Details
- Abstract:
- Before the outbreak of the coronavirus (COVID-19) pandemic, discussions were already taking place on how to complete Economic and Monetary Union (EMU) and increase its resilience, inter alia, by speeding up economic convergence. The impact of the current unprecedented crisis on the euro area economy has given the debate new impetus. As a contribution to this topic – and without going into details of new mechanisms for crisis resolution – this paper analyses the role of fiscal transfers in real and business cycle convergence at a regional level. The paper distinguishes between net fiscal transfers – a broad measure defined as the ratio between disposable and primary incomes – and EU structural and investment funds. It provides evidence that net fiscal transfers have contributed to income redistribution across regions and to faster convergence in disposable incomes, although not to higher economic growth and real convergence. More positive evidence has been found for the role of the EU structural and investment funds over the medium term, based on the newly available – and richest so far – European Commission database. Going forward, in addition to efficiency considerations, which are important for real convergence, recommendations on the size and allocation of fiscal transfers should account for their impact on the business cycle. At the same time, in the longer run, it should be borne in mind that fiscal transfers are no substitute for genuine structural reforms and sound macroeconomic and fiscal policies when it comes to promoting sustainable economic growth and convergence.
- JEL Code:
- H54,H77,O47
- 2 December 2020
-
Occasional Paper Series - Issue No. 251Details
- Abstract:
- As a response to the global financial crisis that started in 2008, many countries established dedicated resolution regimes that seek to limit the use of taxpayer money while maintaining the functions of failing banks that are critical for financial stability. This paper extends the existing research by zooming in on the specific topic of liquidity provision to banks in resolution. It examines the provision of liquidity in the United States, the United Kingdom, Japan, Canada and the banking union of the European Union (thereafter: the “banking union”). The paper observes the differences and commonalities of policy choices across jurisdictions with regard to both the relationship between private prefunding and temporary public liquidity provision and the roles of the public budget and the central bank. The comparison also reveals that the role of fiscal authorities is strong and that guarantees from a public budget are a common feature. The framework for the provision of liquidity in the banking union is not yet complete as the construction of a public sector backstop of sufficient size and speed is comparatively more complex in the banking union than in other jurisdictions. Therefore, the idea of establishing a European-level guarantee framework – which would allow access to Eurosystem liquidity for banks coming out of resolution with limited collateral – is being further investigated.
- JEL Code:
- G01,G21,G28,G33,E58
- 2 December 2020
-
The ECB BlogDetails
- Subtitle:
- The results of the ECB’s latest study on payment behaviours suggest that no single means of payment currently available meets all consumer needs, Executive Board member Fabio Panetta writes in The ECB Blog. This underlines the importance of continuing to give people a choice on how to pay.
Related- 30 November 2022
-
The ECB Blog
- 13 July 2022
-
The ECB Blog
- 19 November 2021
-
The ECB Blog
- 14 July 2021
-
The ECB Blog
- 25 March 2021
- 2 October 2020
-
The ECB Blog
- 2 December 2020
-
Other publication
- 2 December 2020
-
MFI interest rate statistics
- 2 December 2020
-
Press releaseRelated
- 2 December 2020
-
Other publication
- 2 December 2020
-
Other publicationDetails
- Network:
- Eurosystem Research Network on Cash (EURECA)
Annexes- 2 December 2020
- 1 December 2020
Related- 2 December 2020
-
Press release
- 1 December 2020
-
Weekly financial statementAnnexes
- 1 December 2020
-
Weekly financial statement - Commentary
- 1 December 2020
-
InterviewDetails
- Subtitle:
- Interview with Isabel Schnabel, Member of the Executive Board of the ECB, conducted by Jana Randow, Carolynn Look and Alexander Weber on 30 November 2020
- 1 December 2020
-
Euro area insurance corporations statisticsAnnexes
- 1 December 2020
-
Euro area insurance corporations statistics
- 30 November 2020
-
Working Paper Series - Issue No. 2497Details
- Abstract:
- We study the impact of macroprudential capital buffers on banking groups' lending and risk-taking decisions, also investigating implications for internal capital markets. For identification, we exploit heterogeneity in buffers applied to other systemically important institutions, using information from three unique confidential datasets, including information on the EBA scoring process. This policy design induces a randomized experiment in the neighborhood of the threshold, which we use to identify the effect of higher capital requirements by comparing the change in the outcome for banks just above and below the cut-off, before and after the introduction of the buffer. The analysis is implemented relying on a fuzzy regression discontinuity and on a difference-in-differences matching design. We find that, when parent banks are constrained with higher buffers, subsidiaries deleverage lending and risk-taking towards non-financial corporations and marginally expanded lending towards households, with negative effects on profitability. Also, we find that parents cut down on holdings of debt and equity issued by their subsidiaries. Our findings support the hypothesis that higher capital buffers have a positive disciplinary effect by reducing banks' risk-taking while having a (temporary) adverse impact on the real economy through a decrease in affiliated banks' lending activity. Therefore, to ensure the effectiveness of macroprudential policy, it is essential that policymakers assess their potential cross-border effects.
- JEL Code:
- E44,E51,E58,G21,G28
- Network:
- Research Task Force (RTF)
- 30 November 2020
-
InterviewDetails
- Subtitle:
- Article by Christine Lagarde, President of the ECB, in L’ENA hors les murs magazine
- 28 November 2020
-
InterviewDetails
- Subtitle:
- Interview with Yves Mersch, Member of the Executive Board of the ECB, conducted by Marie Charrel and Eric Albert
- 28 November 2020
-
InterviewDetails
- Subtitle:
- Interview with Luis de Guindos, Vice-President of the ECB, conducted by Petri Sajari on 24 November 2020
- 27 November 2020
-
Working Paper Series - Issue No. 2496Details
- Abstract:
- In the current low interest rate environment in the euro area there is potential for a sudden increase in interest rates and heightened interest rate risk (IRR). By using a sample of 81 euro area banks during the period 2014Q4-2018Q1 and a confidential supervisory measure of IRR, this paper identifies which bank-specific characteristics can amplify or weaken the impact of a 200 basis points positive shock in interest rates. We find that banks reliant on core deposits, that hold more floating-interest rate loans and that diversify their lending, either by sector or geography, are less exposed to a positive change in interest rates. Interestingly, we discover that banks that did not exploit the exceptional financing provided by the European Central Bank (ECB) reveal greater IRR exposure. These findings advance the debate on the impact on euro area banking of a possible return to a normalised monetary policy.
- JEL Code:
- E43,E44,E52,G21,F44
- 27 November 2020
-
Working Paper Series - Issue No. 2495Details
- Abstract:
- We estimate the effects of interest rate forward guidance (FG) using a parsimonious VAR, augmented with survey forecast data. The identification strategy of FG shocks via sign and zero restrictions is successfully tested by the recovery of true IRFs from simulated data. The identified shocks from the VAR suggest that FG has a stronger effect on macro variables and deviations are more instantaneous compared to the hump-shaped response following unanticipated changes in monetary policy. We apply this evidence to calibrate free parameters of an otherwise estimated DSGE model in order to dampen the FG Puzzle.
- JEL Code:
- C54,E43,E58
- 27 November 2020
-
SpeechDetails
- Subtitle:
- Speech by Fabio Panetta, Member of the Executive Board of the ECB, at the Deutsche Bundesbank conference on the “Future of Payments in Europe”
- 27 November 2020
-
InterviewDetails
- Subtitle:
- Interview with Fabio Panetta, Member of the Executive Board of the ECB, conducted by João Silvestre on 19 November 2020
- 26 November 2020
-
Monetary policy account
- 26 November 2020
-
SpeechDetails
- Subtitle:
- Speech by Philip R. Lane, Member of the Executive Board of the ECB, at the Economics Department and IM-TCD, Trinity College Dublin
- 26 November 2020
-
Monetary developments in the euro areaAnnexes
- 26 November 2020
-
Monetary developments in the euro area
- 25 November 2020
-
Working Paper Series - Issue No. 2494Details
- Abstract:
- We propose a granular framework that makes use of advanced statistical methods to approximate developments in economy-wide expected corporate earnings. In particular, we evaluate the dynamic network structure of stock returns in the United States as a proxy for the transmission of shocks through the economy and identify node positions (firms) whose connectedness provides a signal for economic growth. The nowcasting exercise, with both the in-sample and the out-of-sample consistent feature selection, highlights which firms are contemporaneously exposed to aggregate downturns and provides a more complete narrative than is usually provided by more aggregate data. The two-state model for predicting periods of negative growth can remarkably well predict future states by using information derived from the node-positions of manufacturing, transportation and financial (particularly insurance) firms. The three-states model, which identifies high, low and negative growth, successfully predicts economic regimes by making use of information from the financial, insurance, and retail sectors.
- JEL Code:
- C45,C51,D85,E32,N1
- 25 November 2020
-
Press releaseRelated
- 25 November 2020
-
Financial Stability Review
- 25 November 2020
-
Financial Stability Review - ArticleProspects for euro area bank lending margins in an extended low-for-longer interest rate environmentFinancial Stability Review Issue 2, 2020Details
- Abstract:
- We examine some aspects of how the low-for-even-longer interest rate environment may affect bank lending margins and overall financial stability. We find evidence that margins fall more in response to declines in nominal short-term rates when these are low to begin with. The compression of margins reflects the sluggish response to further policy rate cuts of deposit rates as these approach the zero lower bound. Moreover, the analysis indicates that bank margins and overall profitability are influenced by both the level of real rates and, more materially, the level of inflation expectations embedded in nominal rates, which reflects the fact that bank profits are partly akin to seigniorage.
- JEL Code:
- G2,E43
- 25 November 2020
-
Financial Stability ReviewAnnexes
- 25 November 2020
Related- 25 November 2020
- 25 November 2020
-
Research Bulletin - Issue No. 77Details
- Abstract:
- We set out to analyse the monetary policy transmission mechanism by documenting how the annual investment of more than one million firms in Germany, Spain, France and Italy responded to monetary policy shocks between 2000 and 2016. We show that euro area firms react differently depending on their age and the industry they operate in: young firms and those producing durable goods react more strongly than the average firm. This confirms that monetary policy is affecting firms’ investment through two different channels. On the one hand, the “interest rate channel” affects demand for durable goods more than demand for services, which in turn affects investment demand from the producers of those goods. On the other hand, as young firms are more likely to face financing constraints, their stronger than average reaction can be explained by the “balance sheet channel” of monetary policy transmission.
- JEL Code:
- E22,E52
- 25 November 2020
-
InterviewDetails
- Subtitle:
- Interview with Yves Mersch, Member of the Executive Board of the ECB and Vice-Chair of the Supervisory Board of the ECB, conducted by Martin Arnold on 23 November 2020
- 24 November 2020
- 24 November 2020
-
Weekly financial statementAnnexes
- 24 November 2020
-
Weekly financial statement - Commentary
- 24 November 2020
-
SpeechDetails
- Subtitle:
- Speech by Isabel Schnabel, Member of the Executive Board of the ECB, at The Bank of Finland Monetary Policy webinar: New Challenges to Monetary Policy Strategies
Annexes- 24 November 2020
-
Speech
- 24 November 2020
-
Working Paper Series - Issue No. 2493Details
- Abstract:
- A growing body of literature analyses the impact of news on companies’ equity prices. We add to this literature by showing that the transmission channel of news to prices differs across sectors. First, we disentangle sectoral equity prices into components of expected future earnings and equity risk premia. Then, we evaluate how these react to general and sector specific sentiment shocks constructed from Reuters news articles. We find that price changes for especially the financial sector are mainly driven by changes in equity risk premia, while changes in earnings expectations play a comparatively larger role for other sectors.
- JEL Code:
- G10,G12,G14
- 24 November 2020
-
Working Paper Series - Issue No. 2492Details
- Abstract:
- This paper studies how low interest rates weaken the short-run transmission of monetary policy and contract the long-run supply of bank credit. As U.S. bond rates have fallen, the pass-through of monetary shocks to loan and deposit rates has weakened while the spread on U.S. bank loans has risen. I build a model in which banks earn deposit and loan spreads, deposits compete with money, and banks’ lending capacity depends on their equity. The short-run transmission of monetary policy is dampened at low rates, because deposit spreads act as a better hedge for bank equity against unexpected monetary shocks. In the long run, persistent low rates decrease banks’ “seigniorage” revenue from deposit spreads, hence bank equity and loan supply contract, and loan spreads increase.
- JEL Code:
- E4,E5,G21
- Network:
- ECB Lamfalussy Fellowship Programme
- 24 November 2020
-
Press releaseRelated
- 24 November 2020
-
Survey on the Access to Finance of Enterprises in the euro area
- 24 November 2020
-
Financial Stability Review - ArticleFinancial Stability Review Issue 2, 2020Details
- Abstract:
- Fiscal, prudential and monetary authorities have responded to the coronavirus (COVID-19) pandemic by providing unprecedented support to the real economy. Importantly, the combination of policy actions has done more to limit the materialisation of risks to households and firms than each policy individually. Exploiting complementarities and ensuring the most effective combination of policies will, however, be equally important when authorities start to phase out the various related relief measures. The fact that in particular the enacted fiscal and labour market measures, as well as their phase-out schedules, differ substantially across the largest euro area economies further complicates the challenge of obtaining the most effective policy combination. Along with the reduction in support to the real economy, the phasing-out of policy measures could adversely affect banks’ balance sheets and capitalisation. Resulting cliff effects in policy support are relevant for prudential authorities in the context of their future decisions on the replenishment of capital buffers. The results of the analysis suggest there are substantial risks associated with the early withdrawal of policy support, although the analysis does not account for the medium-term risks of protracted policy support.
- JEL Code:
- C68,E52,E58,E62,E63,G21,H81
- 24 November 2020
-
Euro money market statistics
- 24 November 2020
-
Survey on the Access to Finance of Enterprises in the euro areaAnnexes
- 24 November 2020
-
SAFE questionnaire
- 23 November 2020
-
SpeechShifting tides in euro area money markets: from the global financial crisis to the COVID-19 pandemicDetails
- Subtitle:
- Speech by Isabel Schnabel, Member of the Executive Board of the ECB, at the ECB Conference on Money Markets, 23 November 2020
Annexes- 23 November 2020
-
Speech
- 23 November 2020
-
Working Paper Series - Issue No. 2491Details
- Abstract:
- The assets under management of investment funds have soared in recent years, triggering a debate on their possible implications for financial stability. We contribute to this debate assessing the asset price impact of fire sales in a novel partial equilibrium model of euro area funds and banks calibrated over the period between 2008 and 2017. An initial shock to yields causes funds to sell assets to address investor redemptions, while both banks and funds sell assets to keep their leverage constant. These fire sales generate second-round price effects. We find that the potential losses due to the price impact of fire sales have decreased over time for the system. The contribution of funds to this impact is lower than that of banks. However, funds’ relative contribution has risen due to their increased assets under management and banks’ lower leverage and rebalancing towards loans. Should this trend continue, funds will become an increasingly important source of systemic risk.
- JEL Code:
- G1,G21,G23
- 23 November 2020
-
Working Paper Series - Issue No. 2490Details
- Abstract:
- In this paper, we apply textual analysis and machine learning algorithms to construct an index capturing trade tensions between US and China. Our indicator matches well-known events in the US-China trade dispute and is exogenous to the developments on global financial markets. By means of local projection methods, we show that US markets are largely unaffected by rising trade tensions, with the exception of those firms that are more exposed to China, while the same shock negatively affects stock market indices in EMEs and China. Higher trade tensions also entail: i) an appreciation of the US dollar; ii) a depreciation of EMEs currencies; iii) muted changes in safe haven currencies; iv) portfolio re-balancing between stocks and bonds in the EMEs. We also show that trade tensions account for around 15% of the variance of Chinese stocks while their contribution is muted for US markets. These findings suggest that the US-China trade tensions are interpreted as a negative demand shock for the Chinese economy rather than as a global risk shock.
- JEL Code:
- D53,E44,F13,F14,C55
- 23 November 2020
-
Survey of Monetary Analysts
- 23 November 2020
-
Press releaseRelated
- 23 November 2020
- 23 November 2020
- 23 November 2020
-
Other publicationAnnexes
- -
-
Other publication
Related- 23 November 2020
- 23 November 2020
-
Other publicationAnnexes
- -
-
Other publication
Related- 23 November 2020
- 22 November 2020
-
InterviewDetails
- Subtitle:
- Interview with Philip R. Lane, Member of the Executive Board of the ECB, conducted by Guillaume Benoit, Elsa Conesa and Sophie Rolland
- 21 November 2020
-
InterviewDetails
- Subtitle:
- Interview with Yves Mersch, Member of the Executive Board of the ECB and Vice-Chair of the Supervisory Board of the ECB, conducted by Kai Johannsen and published on 21 November 2020
- 20 November 2020
-
Governing Council decisions - Other decisions
- 20 November 2020
-
SpeechDetails
- Subtitle:
- Keynote speech by Christine Lagarde, President of the ECB, at the European Banking Congress
- 19 November 2020
-
SpeechDetails
- Subtitle:
- Speech by Isabel Schnabel, Member of the Executive Board of the ECB, Financial Stability Conference on “Stress, Contagion, and Transmission” organised by the Federal Reserve Bank of Cleveland and the Office of Financial Research
Annexes- 19 November 2020
-
Speech
- 19 November 2020
-
Working Paper Series - Issue No. 2489Details
- Abstract:
- This paper examines the role of international investment funds in the transmission of global financial conditions to the euro area using structural Bayesian vector auto regressions. While cross-border banking sector capital flows receded significantly in the aftermath of the global financial crisis, portfolio flows from investors actively searching for yield on financial markets world-wide gained importance during the post-crisis “second phase of global liquidity” (Shin, 2013). The analysis presented in this paper shows that a loosening of US monetary policy leads to higher investment fund inflows to equities and debt globally. Focussing on the euro area, these inflows not only imply elevated asset prices, but also coincide with increased debt and equity issuance. The findings demonstrate the growing importance of non-bank financial intermediation over the past decade and hold important policy implications for monetary and financial stability.
- JEL Code:
- F32,F42,G15,G23
- 19 November 2020
-
Working Paper Series - Issue No. 2488Details
- Abstract:
- We examine the open-economy implications of the introduction of a central bank digital currency (CBDC).We add a CBDC to the menu of monetary assets available in a standard two-country DSGE model with financial frictions and consider a broad set of alternative technical features in CBDC design. We analyse the international transmission of standard monetary policy and technology shocks in the presence and absence of a CDBC and the implications for optimal monetary policy and welfare. The presence of a CBDC amplifies the international spillovers of shocks to a significant extent, thereby increasing international linkages. But the magnitude of these effects depends crucially on CBDC design and can be significantly dampened if the CBDC possesses specific technical features. We also show that domestic issuance of a CBDC increases asymmetries in the international monetary system by reducing monetary policy autonomy in foreign economies.
- JEL Code:
- E50,F30
- 19 November 2020
-
Balance of payments (monthly)
- 19 November 2020
-
SpeechDetails
- Subtitle:
- Introductory statement by Christine Lagarde, President of the ECB, at the ECON Committee of the European Parliament (by videoconference)
Annexes- 19 November 2020
-
Speech
- 19 November 2020
- 18 November 2020
-
Legal Working Paper Series - Issue No. 20Details
- Abstract:
- The two contributions in this legal working paper discuss the various aspects of composite administrative procedures in the context of both Single Supervisory Mechanism (SSM) and Single Resolution Mechanism (SRM) decision-making procedures. It addresses the definition of such procedures, their relevance in the SSM and SRM context, the allocation of powers in such procedures, differences between composite procedures in the SSM and SRM spheres and differences between composite procedures and mere cooperation or exchange of information procedures. They were originally presented at the ECB legal colloquium on ‘Composite administrative procedures in the European Union’, which took place in Frankfurt am Main in 2020.
- JEL Code:
- G2,G21,K2,K23
- 18 November 2020
-
Other publicationDetails
- Subtitle:
- Selected validation checks performed in AnaCredit datasets
- 17 November 2020
-
InterviewDetails
- Subtitle:
- Interview with Isabel Schnabel, Member of the Executive Board of the ECB, conducted by Annette Weisbach, CNBC, on 12 November and aired on 13 November
- 17 November 2020
-
Weekly financial statementAnnexes
- 17 November 2020
-
Weekly financial statement - Commentary
- 17 November 2020
-
InterviewDetails
- Subtitle:
- Interview with Christine Lagarde, President of the ECB, conducted by Alison Smale and Jack Ewing on 10 November 2020
- 17 November 2020
-
Euro area financial vehicle corporation statisticsAnnexes
- 17 November 2020
-
Euro area financial vehicle corporation statistics
- 17 November 2020
-
Euro area investment fund statisticsAnnexes
- 17 November 2020
-
Euro area investment fund statistics
- 17 November 2020
-
InterviewDetails
- Subtitle:
- Interview with Philip R. Lane, Member of the Executive Board of the ECB, conducted by Maria Nobre, broadcast on Tuesday, 17 November at 12:00 a.m. CET
- 16 November 2020
- 16 November 2020
-
SpeechDetails
- Subtitle:
- Keynote speech by Luis de Guindos, Vice-President of the ECB, at the 23rd EURO FINANCE WEEK
- 12 November 2020
-
SpeechDetails
- Subtitle:
- Keynote speech by Luis de Guindos, Vice-President of the ECB, at the CIRSF (Research Centre on Regulation and Supervision of the Financial Sector, Portugal) online Annual International Conference 2020 on Major Trends in Financial Regulation
- 12 November 2020
-
Economic Bulletin
- 12 November 2020
-
Economic Bulletin - BoxEconomic Bulletin Issue 7, 2020Details
- Abstract:
- The September 2020 ECB staff macroeconomic projections used a revised weighting scheme for the euro area’s trading partners. Two key conceptual changes were implemented in the weighting scheme this year. First, data on trade in services were used in addition to data on trade in goods. Second, the number of euro area trading partners was increased from 30 to 42. As a result of these changes, the coverage of the euro area’s foreign demand by individual country data increased from 85% to 92%, with the remaining countries covered by regional aggregates.
- JEL Code:
- E50,E66,F01,F17
- 11 November 2020
-
SpeechDetails
- Subtitle:
- Keynote speech by Christine Lagarde, President of the ECB, at the ECB Forum on Central Banking
- 11 November 2020
-
Euro area securities issues statisticsAnnexes
- 11 November 2020
-
Euro area securities issues statistics
- 11 November 2020
-
Euro area securities issues statistics
- 10 November 2020
-
Weekly financial statementAnnexes
- 10 November 2020
-
Weekly financial statement - Commentary
- 10 November 2020
-
Working Paper Series - Issue No. 2487Details
- Abstract:
- Could a monetary policy loosening entail the opposite effect than the intended expansionary impact in a low interest rate environment? We demonstrate that the risk of hitting the rate at which the effect reverses depends on the capitalization of the banking sector by using a non-linear macroeconomic model calibrated to the euro area economy. The framework suggests that the reversal interest rate is located in negative territory of around −1% per annum. The possibility of the reversal interest rate creates a novel motive for macroprudential policy. We show that macroprudential policy in the form of a countercyclical capital buffer, which prescribes the build-up of buffers in good times, can mitigate substantially the probability of encountering the reversal rate, improves welfare and reduces economic fluctuations. This new motive emphasizes also the strategic complementarities between monetary policy and macroprudential policy.
- JEL Code:
- E32,E44,E52,E58,G21
- 10 November 2020
-
Occasional Paper Series - Issue No. 250Details
- Abstract:
- This paper contributes to the debate on liquidity in resolution by providing a quantitative assessment of liquidity gaps of banks in resolution in the euro area. It estimates possible ranges of liquidity gaps for significant banks under different assumptions and scenarios. The findings suggest that, while the average liquidity gaps in resolution are limited, the averages hide significant outliers. The paper thus shows that, under adverse circumstances, the instruments currently available to provide liquidity support to financial institutions in the euro area would be insufficient
- JEL Code:
- G01,G21,G28,G33,C63
- 10 November 2020
-
Economic Bulletin - BoxEconomic Bulletin Issue 7, 2020Details
- Abstract:
- The coronavirus (COVID-19) pandemic has triggered large shifts in household consumption as well as issues related to price collection. We construct a monthly-reweighted consumer price index for the euro area which is able to capture part of the changes in household consumption since the beginning of the pandemic. In this way, we quantify the gap between published HICP inflation and the inflation rate of the items actually purchased by final consumers. Furthermore, we discuss the issue of price imputation and its impact on published statistics.
- JEL Code:
- E2,E3,E4
- 10 November 2020
-
Economic Bulletin - ArticleEconomic Bulletin Issue 7, 2020Details
- Abstract:
- This article provides an overview of financial fragmentation during the coronavirus (COVID-19) crisis and the policies enacted to counter its effects. It does so through the lens of a set of high-frequency indicators for monitoring developments in financial integration. The readings from these indicators are then linked to unfolding economic and political events and to the main policy responses in monetary, fiscal and financial stability policy at the national and European levels. After initial sharp fragmentation, euro area financial integration broadly recovered to pre-crisis levels by mid-September, but not for all indicators. However, this recovery is still fragile and relies on an unprecedented amount of fiscal, monetary and prudential policy support.
- JEL Code:
- G00,F36
- 10 November 2020
-
Economic Bulletin - ArticleEconomic Bulletin Issue 7, 2020Details
- Abstract:
- The coronavirus (COVID-19) pandemic almost certainly affected potential output negatively via various channels, affecting the trends of total factor productivity, capital and labour. Quantitative estimates show that euro area potential growth will likely stall or even decline in 2020 and the pace of the recovery is highly uncertain, as it depends on whether the shock is temporary or persistent. Comprehensive policy measures are playing a crucial role in preventing hysteresis in the euro area economy and long-term economic scarring.
- JEL Code:
- E22,E23,E24,E32,O11,O40
- 9 November 2020
-
Economic Bulletin - BoxEconomic Bulletin Issue 7, 2020Details
- Abstract:
- Newly released data on the written premiums, incurred claims and acquisition expenses of insurance corporations help monitor the euro area insurance sector, which is growing in total assets and becoming increasingly important for financing the economy. The data reveal a significant growth in premiums and claims over the past two years, with considerable differences across insurance sectors. Incurred claims remain below premiums written and are growing at a slower pace. The data can also be used to assess the share of premiums used to attract new business and to monitor cross-border business activities via branches in the insurance sector.
- JEL Code:
- E01,G22,G52
- 9 November 2020
-
Economic Bulletin - ArticleEconomic Bulletin Issue 7, 2020Details
- Abstract:
- The article describes the new quarterly and annual data available on pension funds reported under the ECB Regulation on statistical reporting requirements for pension funds (ECB/2018/2). The Regulation aims to increase transparency and improve data comparability in this fast-growing sector of the financial industry. The first harmonised information on pension funds reported under the Regulation was quarterly data for the third quarter of 2019 and annual data for 2019. These harmonised data enable the ECB and the euro area national central banks to compile a new set of statistics on pension funds. The first release of the pension fund dataset took place on 31 July 2020.
- JEL Code:
- G23,J32,E21
- 6 November 2020
-
Other publication
- 5 November 2020
-
SpeechDetails
- Subtitle:
- Presentation by Isabel Schnabel, Member of the Executive Board of the ECB, at a webinar hosted by the ECONtribute Cluster of Excellence (University of Bonn/University of Cologne)
- 5 November 2020
- 4 November 2020
-
SpeechDetails
- Subtitle:
- Speech by Isabel Schnabel, Member of the Executive Board of the ECB, at the second EBI Policy Conference on “Europe and the Covid-19 Crisis – Looking back and looking forward”
Annexes- 4 November 2020
-
Speech
- 4 November 2020
-
SpeechDetails
- Subtitle:
- Transcript of Q&A session following a fireside chat with Yves Mersch, Member of the Executive Board of the ECB and Vice-Chair of the Supervisory Board of the ECB, at an online UBS event on the European economic and policy outlook, conducted on 30 October 2020
- 4 November 2020
-
Working Paper Series - Issue No. 2486Details
- Abstract:
- The interest rate-growth differential (
- JEL Code:
- E43,E62,H63,H68,G1
- 4 November 2020
-
Press releaseRelated
- 4 November 2020
- 4 November 2020
-
Survey on credit terms and conditions in euro-denominated securities financing and OTC derivatives marketsAnnexes
- 4 November 2020
-
Other publication
- 4 November 2020
-
Other publication
- 4 November 2020
-
SpeechDetails
- Subtitle:
- Speech by Fabio Panetta, Member of the Executive Board of the ECB, at Il Salone dei Pagamenti 2020
- 3 November 2020
-
InterviewDetails
- Subtitle:
- Interview with Isabel Schnabel, Member of the Executive Board of the ECB, conducted by Jan Mallien and Frank Wiebe
- 3 November 2020
-
Weekly financial statementAnnexes
- 3 November 2020
-
Weekly financial statement - Commentary
- 2 November 2020
-
SpeechDetails
- Subtitle:
- Keynote speech by Yves Mersch, Member of the Executive Board of the ECB and Vice-Chair of the Supervisory Board of the ECB, at the ESCB Legal Conference
- 2 November 2020
-
Other publicationCost-benefit assessment questionnaire on the Integrated Reporting Framework for the banking industryAnnexes
- 2 November 2020
-
Other publication
- 2 November 2020
-
Other publication
- 2 November 2020
-
MFI interest rate statistics
- 2 November 2020
-
€STR Transparency on errors
- 30 October 2020
- 30 October 2020
- 30 October 2020
- 30 October 2020
-
Governing Council decisions - Other decisions
- 30 October 2020
-
Working Paper Series - Issue No. 2485Details
- Abstract:
- This paper explores whether the transmission mechanism between wages and prices in the euro area is affected by the growth regime. Since the great financial crisis inflation developments have posed major puzzles to economists as inflation declined by less than was widely expected during the past recessions and rose by less during the subsequent recoveries. This paper analyses whether the wage-price pass-through may have contributed to these inflation puzzles. Applying the Threshold VAR model proposed by Alessandri and Mumtaz (2017) to the analysis of the wage-price pass-through, the paper examines whether the transmission mechanim of different types of shocks differs between recessions and expansions. The results point to differences in the wage-price pass-through between growth regimes for demand shocks but not for wage mark-up shocks. They show a much smaller response of prices relative to wages, i.e. a smaller wage-price pass-through, for demand shocks in recessions than in expansions. This is accounted for by a smaller relative response of profit margins. More generally, the results suggest that the slope of the price Phillips curve flattens in recessions on account of the lower wage-price pass-through, while the wage Phillips curve appears to be broadly stable across growth regimes. Overall, the results contribute to solve or diminish the puzzle of the missing disinflation of the past two recessions suggesting that inflation should be expected to recede by less during recessions than indicated by standard linear models.
- JEL Code:
- C32,E31,J30
- 30 October 2020
-
Working Paper Series - Issue No. 2484Details
- Abstract:
- To analyze the international transmission of business cycle fluctuations, we propose a new multilevel dynamic factor model with a block structure that (i) does not restrict the factors to being orthogonal and (ii) mixes data sampled at quarterly and monthly frequencies. By means of Monte Carlo simulations, we show the high performance of the model in computing inferences of the unobserved factors, accounting for the spillover effects, and estimating the model's parameters. We apply our proposal to data from the G7 economies by analyzing the responses of national factors to shocks in foreign factors and by quantifying the changes in national GDP expectations in response to unexpected positive changes in foreign GDPs. Although the share of the world factor as a source of the international transmission of fluctuations is still significant, this is partially absorbed by the spillover transmissions. In addition, we document a pro-cyclical channel of international transmission of output growth expectations, with the US and UK being the countries that generate the greatest spillovers and Germany and Japan being the countries that generate the smallest spillovers. Therefore, policymakers should closely monitor the evolution of foreign business cycle expectations.
- JEL Code:
- E32,C22,F42,F41
- 30 October 2020
-
Press releaseRelated
- 30 October 2020
-
Survey of Professional Forecasters
- 30 October 2020
-
Survey of Professional ForecastersAnnexes
- 30 October 2020
Related- 30 October 2020
- 29 October 2020
-
Monetary policy statementDetails
- Subtitle:
- Christine Lagarde, President of the ECB,Luis de Guindos, Vice-President of the ECB
- 29 October 2020
-
Monetary policy decision
- 29 October 2020
-
Euro area economic and financial developments by institutional sector (full)
- 28 October 2020
- 27 October 2020
-
Weekly financial statementAnnexes
- 27 October 2020
-
Weekly financial statement - Commentary
- 27 October 2020
-
Monetary developments in the euro areaAnnexes
- 26 October 2020
-
Monetary developments in the euro area
- 27 October 2020
-
Press releaseRelated
- 27 October 2020
-
Euro area bank lending survey
- 27 October 2020
-
Euro area bank lending surveyAnnexes
- 27 October 2020
-
Euro area bank lending survey - Annex
Related- 27 October 2020
-
Press release
- 22 October 2020
-
SpeechDetails
- Subtitle:
- Keynote speech by Fabio Panetta, Member of the Executive Board of the ECB, at the ECB Conference “A new horizon for pan-European payments and digital euro”
- 21 October 2020
-
Press release
- 21 October 2020
-
SpeechDetails
- Subtitle:
- Remarks by Luis de Guindos, Vice-President of the ECB, on the occasion of the award of the Bernácer Prize to Professor Loukas Karabarbounis
- 21 October 2020
-
SpeechDetails
- Subtitle:
- Presentation by Philip R. Lane, Member of the Executive Board of the ECB, at the 1st Joint Workshop of Bank of England, Banque de France, IMF and OECD
- 21 October 2020
-
Working Paper Series - Issue No. 2483Details
- Abstract:
- This paper analyses money market developments since 2005, and examines factors that have affected money market functioning. We consider several metrics of activity in both secured and unsecured euro area money markets, and study interactions with new Basel III regulations and with central bank policies (liquidity provision, asset purchases and the Securities Lending Programme). Using aggregate data, we document that, prior to 2015, heightened financial market volatility coincided with worsening money market conditions, while higher central bank liquidity provision was associated with reduced money market stress. After 2015, the evidence is consistent with central bank asset purchases inducing scarcity effects in some money market segments, and with active securities lending supporting money market functioning. Using transactions-level money market data combined with supervisory data, we further document that the leverage ratio regulation impacts money markets at quarter-ends due to “window-dressing” effects, reducing money market volumes and rates. We also consider the macroeconomic impact of changing money market conditions, finding that the impact depends on whether frictions originate in secured or unsecured markets and on central bank policies in place.
- JEL Code:
- E44,E58,G12,G20,G28
- Network:
- Discussion papers
- 21 October 2020
-
Discussion Paper Series - Issue No. 12Details
- Abstract:
- This paper analyses money market developments since 2005, and examines factors that have affected money market functioning. We consider several metrics of activity in both secured and unsecured euro area money markets, and study interactions with new Basel III regulations and with central bank policies (liquidity provision, asset purchases and the Securities Lending Programme). Using aggregate data, we document that, prior to 2015, heightened financial market volatility coincided with worsening money market conditions, while higher central bank liquidity provision was associated with reduced money market stress. After 2015, the evidence is consistent with central bank asset purchases inducing scarcity effects in some money market segments, and with active securities lending supporting money market functioning. Using transactions-level money market data combined with supervisory data, we further document that the leverage ratio regulation impacts money markets at quarter-ends due to “window-dressing” effects, reducing money market volumes and rates. We also consider the macroeconomic impact of changing money market conditions, finding that the impact depends on whether frictions originate in secured or unsecured markets and on central bank policies in place.
- JEL Code:
- E44,E58,G12,G20,G28
- 20 October 2020
-
The ECB BlogDetails
- Subtitle:
- Blog post by Isabel Schnabel, Member of the Executive Board of the ECB
- 20 October 2020
-
Weekly financial statementAnnexes
- 20 October 2020
-
Weekly financial statement - Commentary
- 20 October 2020
-
Balance of payments (monthly)
- 20 October 2020
-
Research Bulletin - Issue No. 76Details
- Abstract:
- What does quantitative easing (QE) really mean for the exchange rate? This article explains how the relevant effects can be estimated using a statistical methodology derived from theory. The results suggest that QE has large and persistent effects on the USD/EUR exchange rate, mainly through shifts in exchange rate risk and short-term interest rates between the two currencies. Changes in expectations about the future monetary policy stance, reflecting the “signalling channel” of monetary policy, also affect how the USD/EUR exchange rate responds to QE.
- JEL Code:
- F41
- 19 October 2020
-
SpeechDetails
- Subtitle:
- Introductory remarks by Yves Mersch, Member of the Executive Board of the ECB and Vice-Chair of the Supervisory Board of the ECB, at the MNI Connect Roundtable
- 19 October 2020
-
Statistics Paper Series - Issue No. 38Details
- Abstract:
- This paper details the rationale and methodology behind the construction of the Persistent and Common Component of Inflation (PCCI), a measure of underlying inflation in the euro area. The PCCI reflects the view that underlying inflation captures widespread developments across the Harmonised Index of Consumer Prices (HICP) basket and that it is the persistent component of inflation. Methodologically, it relies on a generalised dynamic factor model estimated on a large set of disaggregated HICP inflation rates for 12 euro area countries. For each individual inflation rate, we estimate a low-frequency common component, i.e. a component driven by shocks or factors that are relevant for all inflation series and capturing cycles longer than three years. The PCCI is a weighted average of these common components. It is an alternative to the typical exclusion-based measures used to gauge underlying inflation (e.g. HICP excluding food and energy), as it does not a priori exclude any HICP items. It exhibits a set of desirable properties as a measure of underlying inflation, and it is a good tracker of more lasting inflationary developments (judging by smoothness and bias). Furthermore, it is timely and signals turning points with some lead, while acting as an attractor for headline inflation.
- JEL Code:
- C32,E31,E32,E52
- 19 October 2020
-
Macroprudential Bulletin - Annex - Issue No. 11
- 19 October 2020
-
Macroprudential Bulletin - Article - Issue No. 11Details
- Abstract:
- Had authorities built up larger countercyclical buffers before the pandemic, it would have been easier to release capital in response to the crisis. The “lower for longer” interest rate environment reinforces the case for building up releasable buffers in good times. The article shows that enhancing countercyclical capacity can improve the policy mix available to achieve macro-financial stabilisation.
- JEL Code:
- E32,E44,E52,E58,G21
- 19 October 2020
-
Macroprudential Bulletin - Article - Issue No. 11Details
- Abstract:
- This article discusses how market pressure can impede the usability of regulatory buffers. The capital relief measures in the euro area since the outbreak of the COVID-19 crisis had so far mixed effects on banks’ target CET1 ratio, suggesting an impeded pass-through. Market pressure can be a key explanatory factor, with pressure from credit and, critically, equity investors.
- JEL Code:
- G01,G21,G28,C58
- 19 October 2020
-
Macroprudential Bulletin - Article - Issue No. 11Details
- Abstract:
- This article analyses the role of capital buffers in containing the reduction of lending to the real economy during the COVID-19 crisis. Our results show that banks’ use of capital buffers leads to better economic outcomes, without a negative impact on their resilience. Banks’ willingness to use capital buffers is reflected in higher lending, with positive effects on GDP and lower credit losses, while the resilience of the banking system is not compromised.
- JEL Code:
- G01,G17,C22,C54,G21
- 19 October 2020
-
Macroprudential Bulletin - Article - Issue No. 11Details
- Abstract:
- This article discusses capital buffer usability in the Basel III framework. Although buffers are intended to be used in a crisis, a number of factors can prevent banks from drawing them down in case of need, with potentially adverse effects for the economy. The article reviews the functioning of the framework in the COVID-19 crisis and outlines possible implications for future policy design.
- JEL Code:
- G01,G21,G28
- 19 October 2020
-
InterviewDetails
- Subtitle:
- Interview with Christine Lagarde, President of the ECB, conducted by Marie Charrel and Eric Albert
- 18 October 2020
-
SpeechDetails
- Subtitle:
- Contribution by Christine Lagarde, President of the ECB, during the session “Rebuilding and Sustaining Growth”
- 17 October 2020
-
InterviewDetails
- Subtitle:
- Interview with Fabio Panetta, Member of the Executive Board of the ECB, conducted by Eirini Chrysolora
- 15 October 2020
-
SpeechDetails
- Subtitle:
- Statement by Christine Lagarde, President of the ECB, at the forty-second meeting of the International Monetary and Financial Committee
- 15 October 2020
-
Working Paper Series - Issue No. 2482Details
- Abstract:
- The news about the economy contained in a central bank announcement can affect public expectations. This paper shows, using both event studies and vector autoregressions, that such central bank information effects are an important channel of the transatlantic spillover of monetary policy. They account for a part of the co-movement of German and US government bond yields around Fed policy announcements, and for most of this co-movement around ECB policy announcements, explaining the puzzling responses of US variables.
- JEL Code:
- E52,F31,F42
- 15 October 2020
-
Working Paper Series - Issue No. 2481Details
- Abstract:
- This paper builds a database of idiosyncratic shocks (events) in global banks and car manufacturers (as representative of non-financial firms), and focuses on how these influence a number of macroeconomic and firm-specific variables in the short- and medium-term. We find that these shocks spawn large and persistent effects on the firms’ own market valuation in terms of their equity prices, CDS spreads and expected default probabilities, while contagion across firms in both sectors is generally small. Surprisingly, we find that spill-overs of bank-related events are not significantly different from the car sector, suggesting that, at least from this perspective, banks are not special. We also investigate whether our events are “granular”, i.e. influencing aggregate variables such as the VIX, equity indexes and key exchange rates, with mixed results.
- JEL Code:
- F3,G2
- 14 October 2020
-
SpeechDetails
- Subtitle:
- Presentation by Philip R. Lane, Member of the Executive Board of the ECB, at the SUERF online conference on "How to spend it? How to pay it back? EU and US Perspectives"
- 14 October 2020
-
Occasional Paper Series - Issue No. 249Details
- Abstract:
- This paper summarises the economic analyses of the potential impact of Brexit on the United Kingdom, European Union (EU) and euro area performed by members of and contributors to the Brexit Task Force, a group reporting to the International Relations Committee of the European System of Central Banks. The studies were carried out between 2017 and the initial months of 2019 and have been independently published by the authors. The aim of this Occasional Paper is to present the studies in an organic manner, highlighting common features and results.
- JEL Code:
- F14,F15,F21,F22
- 13 October 2020
-
Weekly financial statementAnnexes
- 13 October 2020
-
Weekly financial statement - Commentary
- 13 October 2020
-
Research Bulletin - Issue No. 75Details
- Abstract:
- The 2020 US CARES Act (Coronavirus Aid, Relief, and Economic Security) aimed to bolster consumer spending. We model the spending and saving behaviour of households during the coronavirus (COVID-19) pandemic, differentiating between the employed, temporarily unemployed and persistently unemployed, and examine how the CARES Act should affect this behaviour. To do this we use a benchmark model which realistically captures the differences in income, wealth and spending between households, and which matches the responses to previous stimulus policies well. We extend the model to account for the fact that, during a lockdown, many types of spending are undesirable or impossible, and that some of the jobs that disappear during lockdown will not reappear when it is lifted. We estimate that, in the case of a short-lived lockdown (which was the median point of view in April 2020), the CARES Act should be sufficient to allow a swift recovery in consumer spending to its pre-crisis levels. For a longer-lasting lockdown (if there is a “second wave” of the virus), an extension of enhanced unemployment benefits is likely to be necessary for consumption spending to recover quickly. We have made the modelling software available for other researchers, so that they can examine the consequences of alternative assumptions about the length of the lockdown, distribution of the stimulus payments, and other modelling choices.
- JEL Code:
- E31,E32,E37,E52
- 12 October 2020
-
SpeechDetails
- Subtitle:
- Introductory statement by Fabio Panetta, Member of the Executive Board of the ECB, at the ECON Committee of the European Parliament
- 12 October 2020
-
SpeechDetails
- Subtitle:
- Speech by Isabel Schnabel, Member of the Executive Board of the ECB, at the Interparliamentary Conference on Stability, Economic Coordination and Governance in the European Union
- 12 October 2020
-
Euro area securities issues statisticsAnnexes
- 12 October 2020
-
Euro area securities issues statistics
- 12 October 2020
-
Euro area securities issues statistics
- 12 October 2020
-
Survey of Monetary Analysts
- 11 October 2020
-
InterviewDetails
- Subtitle:
- Interview with Philip R. Lane, Member of the Executive Board of the ECB, conducted by Tom Fairless on 8 October
- 10 October 2020
-
InterviewDetails
- Subtitle:
- Contribution by Isabel Schnabel, Member of the Executive Board of the ECB, Frankfurter Allgemeine Zeitung
- 9 October 2020
-
Working Paper Series - Issue No. 2480Details
- Abstract:
- We quantify the impact that central bank refinancing operations and funding facilities had at reducing the banking sector’s intrinsic fragility in the euro area in 2014-2019. We do so by constructing, estimating and calibrating a micro-structural model of imperfect competition in the banking sector that allows for runs in the form of multiple equilibria, in the spirit of Diamond & Dybvig (1983), banks’ default and contagion, and central bank funding. Our framework incorporates demand and supply for insured and uninsured deposits, and for loans to firms and households, as well as borrowers’ default. The estimation and the calibration are based on confidential granular data for the euro area banking sector, including information on the amount of deposits covered by the deposit guarantee scheme and the borrowing from the European Central Bank (ECB). We document that the quantitative relevance of non-fundamental risk is potentially large in the euro area banking sector, as witnessed by the presence of alternative equilibria with run-type features, but also that central bank interventions exerted a crucial role in containing fundamental as well as non-fundamental risk. Our counterfactuals show that 1 percentage point reduction (increase) in the ECB lending rate of its refinancing operations reduces (increases) the median of banks’ default risk across equilibria by around 50%, with substantial heterogeneity of this pass-through across time, banks and countries.
- JEL Code:
- E44,E52,E58,G01,G21,L13
- Network:
- Research Task Force (RTF)
- 8 October 2020
-
Monetary policy account
- 8 October 2020
-
SpeechDetails
- Subtitle:
- Keynote speech by Yves Mersch, Member of the Executive Board of the ECB and Vice-Chair of the Supervisory Board of the ECB, at the Conference “The Werner Report, 50 Years on”, organised by the Luxembourg Centre for Contemporary and Digital History in cooperation with EUI Florence
- 7 October 2020
-
Weekly financial statementAnnexes
- 7 October 2020
-
Weekly financial statement - Commentary
- 7 October 2020
-
InterviewDetails
- Subtitle:
- Interview with Christine Lagarde, President of the ECB
- 7 October 2020
-
Working Paper Series - Issue No. 2479Details
- Abstract:
- This paper uses granular data on syndicated loans to analyse the impact of international reforms for Global Systemically Important Banks (G-SIBs) on bank lending behaviour. Using a difference-in-differences estimation strategy, we find no effect of the reforms on overall credit supply, while at the same time documenting a substantial decline in borrower- and loan-specific risk factors for the affected banks. Moreover, we detect a significant decline in the pricing gap between interest rates charged by G-SIBs and other banks, which we interpret as indirect evidence for a reduction in funding cost subsidies. Overall, our results suggest that the G-SIB reforms have helped to mitigate moral hazard problems associated with systemically important banks, while the consequences for the real economy have been limited.
- JEL Code:
- G20,G21,G28
- Network:
- Research Task Force (RTF)
- 7 October 2020
-
Working Paper Series - Issue No. 2478Details
- Abstract:
- Throughout the covid‐19 emergency, health authorities have presented contagion data divided by administrative regions with no reference to the type of landscape, environment or development model. This study has been conducted to understand whether there is a correlation between the number of infections and the different rural landscapes of the country. Italy’s rural landscape can be classified in four types, according to the intensity of energy inputs used in the agricultural process, socioeconomic and environmental features. Type A includes areas of periurban agriculture surrounding the metropolitan cities, type B areas of intensive agriculture with high concentration of agroindustry, type C hilly areas with highly diversified agriculture and valuable landscape, and type D high hills and mountains with forests and protected areas. Areas A and B are located in the plains, covering 21% of the territory and accounting for 57% of the population. They produce most of the added value, consume high levels of energy and represent the main source of pollution. Areas C and D cover 79% of the territory and 43% of the population. We find that provinces with 10% more type C and D areas exhibit on average 10% fewer cases of contagion. The result is statistically significant, after controlling for demographic, economic and environmental characteristics of the provinces. The pollution produced in more energy‐intensive landscape has triggered an intense debate of how to ensure the economic competitiveness of Italian agriculture, without compromising environmental integrity or public health. Our findings speak to this debate, by suggesting that planning for more rural territory with lower energy inputs may come with the added benefit of new development opportunities and decreasing the exposure of the population to covid‐19. . Cost benefit‐analyses should take into account that policies aimed at repopulating more rural areas may reduce the economic impact of covid‐19 and of potential future pandemics.
- JEL Code:
- Q1,Q15,O13
- 7 October 2020
- 7 October 2020
- 7 October 2020
- 6 October 2020
-
SpeechDetails
- Subtitle:
- Speech by Philip R. Lane, Member of the Executive Board of the ECB, at the 62nd NABE Annual Meeting “Global Reset? Economics, Business, and Policy in the Pandemic”
- 6 October 2020
-
Working Paper Series - Issue No. 2477Details
- Abstract:
- This paper demonstrates that empirically grounding the discount factor significantly influences the determination of the carbon price. Using two complementary nonlinear statistical approaches, we assess which utility formulations and corresponding stochastic discount factors best align with U.S. data. We provide evidence that habit formation is essential for capturing the time variation in the stochastic discount factor necessary to match the data. This increased time variation raises the carbon price by 32% and makes it five times more procyclical compared to standard models. The heightened procyclicality reduces aggregate risk, the risk premium, and the need for precautionary savings.
- JEL Code:
- Q58,G12,E32
- 6 October 2020
-
Occasional Paper Series - Issue No. 248Details
- Abstract:
- This Occasional Paper analyses how significant expansions in central banks’ mandates, roles and instruments can result in challenges to the independence of monetary policy. The paper reviews, in particular, some of the key challenges to central bank independence brought about by the global financial crisis (GFC) of 2007 and assesses their impact on the de jure and de facto independence of selected central banks around the world in the past few years. It finds that although the level of de jure (legal) central bank independence did not deteriorate, the level of de facto (actual) independence of the central banks of some of the largest economies in the world may have weakened. The paper presents counterarguments to the key critiques raised against central banks due to their policy response during the GFC, and concludes that the case for central bank independence is as strong as ever.
- JEL Code:
- B1,B2,C4,E3,E4,E5,E6,K3,N1,N2
- 6 October 2020
-
Euro money market statistics
- 5 October 2020
-
Working Paper Series - Issue No. 2476Details
- Abstract:
- I propose a new term structure model for euro area real and nominal interest rates which explicitly incorporates a time-varying lower bound for nominal interest rates. Results suggest that the lower bound is of importance in structural analyses implying time-varying impulse responses of yield components. With short-term rate expectations at or close to the lower bound, premium components are less reactive to a typical 10 bp increase in inflation, while real rate responses change their sign from positive to negative. However, it is further shown that the lower bound is of only little relevance for decomposing yields into their expectations and premium components once survey information is incorporated. Overall, results support the conclusion that reaching the effective lower bound may change the way macroeconomic shocks propagate along the term structure of nominal as well as real interest rates.
- JEL Code:
- E31,E43,E44,E52
- 5 October 2020
-
Working Paper Series - Issue No. 2475Details
- Abstract:
- We estimate a modified version of the “Financial Business Cycles” model originally developed by Iacoviello (2015) in order to investigate the role played by financial factors in driving the business cycle in the euro area. In the model, financial shocks such as borrower defaults, collateral shocks and credit supply effects amplify economic downturns by reducing the flow of credit from banks to the real sector. In this novel application to the euro area, we introduce capital reallocation inefficiency, an innovation to the original set-up which allows for more realistic effects of entrepreneur defaults on economic activity. Our results suggest that financial factors, as captured by this model, played a smaller role in the euro area throughout the double-dip recession than in the United States during the 2008-09 global financial crisis. In a scenario on second-round effects implied by potential NFC loan losses due to the COVID-19 pandemic, we find large financial amplification risks to real economic activity.
- JEL Code:
- E32,E44,E47
- 2 October 2020
-
Working Paper Series - Issue No. 2474Details
- Abstract:
- Using a dedicated set of questions in the 2014 Luxembourg Household Finance and Consumption Survey (LU-HFCS), we show that a substantial share of households contributes their own labour to the acquisition of their main residence. These contributions help households faced with credit constraints, since they reduce the need for external financing. We develop a simple theoretical model and show that own labour contributions decrease with the level of financial resources available, while they increase with the mortgage interest rate. These theoretical results are supported by empirical analysis, which also shows that own labour contributions vary by household characteristics (age, gender, profession) and by type of dwelling (house, apartment).
- JEL Code:
- D14,E43,G21,R21
- Network:
- Household Finance and Consumption Network (HFCN)
- 2 October 2020
-
Working Paper Series - Issue No. 2473Details
- Abstract:
- This paper studies the role of sticky prices for the monetary transmission mechanism, using disaggregated industry-level data from 205 US industries. There is substantial heterogeneity in the output responses of industries to monetary policy surprises. I show that an industry's response to monetary policy surprises is systematically related to an industry's degree of price stickiness as measured by the average frequency of price adjustment. The size of the differential reaction is economically large and statistically significant. The results suggest that sticky prices play an important role in the transmission of monetary policy, consistent with New Keynesian macroeconomic models. This result is robust to the inclusion of further industry-level control variables.
- JEL Code:
- E31,E32
- 2 October 2020
-
Euro area economic and financial developments by institutional sector (early)
- 2 October 2020
-
Balance of payments (quarterly)
- 2 October 2020
-
Press release
- 2 October 2020
-
Other publication
- 2 October 2020
-
The ECB BlogDetails
- Subtitle:
- We should be ready to issue a digital euro if and when it is necessary, writes Executive Board member Fabio Panetta. The euro is a currency that Europeans trust. We need to make sure that it is fit for the future.
Related- 30 November 2022
-
The ECB Blog
- 13 July 2022
-
The ECB Blog
- 19 November 2021
-
The ECB Blog
- 14 July 2021
-
The ECB Blog
- 25 March 2021
- 2 December 2020
-
The ECB Blog
- 1 October 2020
-
SpeechDetails
- Subtitle:
- Presentation by Philip R. Lane, Member of the Executive Board of the ECB, at the CEBRA/CEPR/Sveriges Riksbank conference on “Exchange rates and monetary policy”
- 1 October 2020
-
InterviewDetails
- Subtitle:
- Interview with Luis de Guindos, Vice-President of the ECB, conducted by Luke Heighton on 29 September 2020
- 1 October 2020
-
MFI interest rate statistics
- 30 September 2020
- 30 September 2020
-
SpeechDetails
- Subtitle:
- Speech by Christine Lagarde, President of the ECB, at the “ECB and Its Watchers XXI” conference
- 29 September 2020
-
Weekly financial statementAnnexes
- 29 September 2020
-
Weekly financial statement - Commentary
- 29 September 2020
-
Working Paper Series - Issue No. 2472Details
- Abstract:
- The role that the price of oil plays in economic analysis in central banks as well as in financial markets has evolved over time. Oil is not seen anymore just as a input to production but also as a barometer of global economic activity as well as a financial asset. A high frequency structural decomposition of the price of oil can therefore inform on the state of the global business cycle as well as on global financial market sentiment. In this paper we develop a method to identify structural sources of oil price fluctuations at the daily frequency and in real time. The identification strategy blends sign, narrative restrictions and instrumental variable techniques. By using data on asset prices, oil production and global economic activity we account for the double nature of oil: a financial asset as well as a physical commodity. The model offers novel insights on the relationship between the price of oil and asset prices. We also illustrate how the model could have been used in real time to interpret oil price movements in periods of high geopolitical tensions between the US and Iran and to read the drop of crude prices due to fears related to the Corona virus.
- JEL Code:
- Q43,C32,E32,C53
- 28 September 2020
-
Other publication
- 28 September 2020
-
SpeechDetails
- Subtitle:
- Introductory statement by Christine Lagarde, President of the ECB, at the ECON Committee of the European Parliament (by videoconference)
Annexes- 28 September 2020
-
Speech
- 28 September 2020
- 28 September 2020
-
SpeechDetails
- Subtitle:
- Speech by Isabel Schnabel, Member of the Executive Board of the ECB, at the European Sustainable Finance Summit, Frankfurt am Main, 28 September 2020
Annexes- 28 September 2020
-
Speech
- 28 September 2020
-
SpeechDetails
- Subtitle:
- Speech by Isabel Schnabel, Member of the Executive Board of the ECB, at the Annual Meeting 2020 of the Verein für Socialpolitik
- 28 September 2020
-
Press releaseAnnexes
- 28 September 2020
- 28 September 2020
- 28 September 2020
- 28 September 2020
- 28 September 2020
-
Euro area pension fund statisticsAnnexes
- 28 September 2020
-
Euro area pension fund statistics
- 25 September 2020
-
Governing Council decisions - Other decisions
- 25 September 2020
-
Working Paper Series - Issue No. 2471Details
- Abstract:
- We find that it does, but choosing the right specification is not trivial. We unveil notable model instability, with breaks in the performance of most simple Phillips curves. Euro area inflation was particularly hard to forecast in the run-up to the EMU and after the sovereign debt crisis, when the trend and for the latter period, also the amount of slack, were harder to pin down. Yet, some specifications outperform a univariate benchmark most of the time and are thus a useful element in a forecaster's toolkit. We base these conclusions on an extensive forecast evaluation over 1994 - 2018, an extraordinarily long period by euro area standards. We complement the analysis using real-time data over 2005-2018. As lessons for practitioners, we find that: (i) the key type of time variation to consider is an inflation trend; (ii) a simple filter-based output gap works well overall as a measure of economic slack, but after the Great Recession it is outperformed by endogenously estimated slack or by estimates from international economic institutions; (iii) external variables do not bring forecast gains; (iv) newer generation Phillips curve models with several time-varying features are a promising avenue for forecasting, especially when density forecasts are of interest, and finally, (v) averaging over a wide range of modelling choices offers some hedge against breaks in forecast performance.
- JEL Code:
- C53,E31,E37
- 25 September 2020
-
Working Paper Series - Issue No. 2470Details
- Abstract:
- We study the macroeconomic consequences of financial shocks and increase in economic risk using a quantile vector autoregression. Financial shocks have a negative, but asymmetric impact on the real economy: they substantially increase growth at risk, but have limited impact on upside potential. The impact of financial shocks is explained away after controlling for economic risk (measured by the interquantile range). The effects are economically relevant. Bad economic environment, characterized by negative real and financial shocks, has a highly skewed impact on business cycle fluctuations, leading to a peak reduction of monthly industrial production by more than 2%. In comparison, positive real and financial shocks in a good economic environment have limited effect on upside potential of the economy.
- JEL Code:
- C32,C53,E32,E44
- 25 September 2020
- 25 September 2020
- 25 September 2020
- 25 September 2020
-
Monetary developments in the euro areaAnnexes
- 25 September 2020
-
Monetary developments in the euro area
- 24 September 2020
-
InterviewDetails
- Subtitle:
- Interview on Twitter with Philip R. Lane, Member of the Executive Board of the ECB, conducted on 24 September 2020
- 24 September 2020
-
Economic Bulletin
- 24 September 2020
-
Economic Bulletin - BoxEconomic Bulletin Issue 6, 2020Details
- Abstract:
- This box reviews the impact of changes in indirect taxes on inflation developments in the euro area. In the past, increases in indirect taxes have tended to contribute positively to inflation in the euro area. However, the recent reductions in indirect taxes in response to the coronavirus (COVID-19) pandemic in several euro area countries, in particular in Germany, have not been seen before in the euro area on this scale. The impact they will have on inflation is surrounded by considerable uncertainty, but overall the pass-through is likely to be incomplete and to vary across sectors. In this respect, the September 2020 staff projections expect only a quite limited pass-through. The effects are nevertheless large enough to imply a slight V-shape profile for underlying inflation excluding the effects of changes in indirect taxes concealed in the annual numbers for HICPX, as well as a gradual increase between 2020 and 2022.
- JEL Code:
- E31,H22,E37
- 24 September 2020
-
Economic Bulletin - BoxEconomic Bulletin Issue 6, 2020Details
- Abstract:
- This box describes the ECB’s monetary policy operations during the third and fourth reserve maintenance periods spanning from 6 May to 21 July 2020.
- JEL Code:
- E40,E52,E58
- 24 September 2020
-
Economic Bulletin - BoxEconomic Bulletin Issue 6, 2020Details
- Abstract:
- This box introduces the ECB’s enhanced effective exchange rates (EERs) and harmonised competitiveness indicators (HCIs). It presents the new methodology for calculating the underlying weighting scheme, which is based not solely on trade in manufactured goods but now also on trade in services. The inclusion of services trade reflects its growing importance in the light of globalisation and digitalisation and has become possible thanks to increased availability of data.
- JEL Code:
- F10,F30,F31,F40
- 24 September 2020
-
Economic Bulletin - BoxEconomic Bulletin Issue 6, 2020Details
- Abstract:
- Firms’ demand for bank loans has been at a record-high level since March 2020 as firms have scrambled to bridge liquidity gaps originating from the COVID-19 shock. To help banks accommodate the surge in loan demand at favourable conditions, most euro area governments have implemented schemes of public guarantees on bank loans. These transfer some of the arising credit risk and eventual credit losses from banks to governments, thereby mitigating the costs for banks. The features of the loan guarantee schemes’ vary across countries as well as their actual use, with higher take-ups being reported in Spain and France, while lower amounts have been taken up in Italy and Germany. Moreover, SMEs in the sectors most affected by the crisis (e.g. trade, tourism, transport) seem to have benefited the most from these programmes. Overall, public loan guarantee schemes have played a key role in supporting corporate lending dynamics since April and preserving favourable lending conditions. The phasing out of these schemes needs to be carefully aligned with corporate financing needs in the months ahead, while their potential side-effects warrant monitoring.
- JEL Code:
- E44,E51,E62,G21,H81
- 23 September 2020
-
Economic Bulletin - ArticleEconomic Bulletin Issue 6, 2020Details
- Abstract:
- Fiscal policy is playing a key role in stemming the economic fallout from the coronavirus (COVID-19) pandemic. In addition to the discretionary fiscal policy measures employed by governments, automatic fiscal stabilisers play an important role in cushioning the economic downturn. This article shows that automatic fiscal stabilisers are generally sizeable in the euro area, but vary significantly across Member States. However, their effectiveness may be more limited at the current juncture, given the nature of the COVID-19 crisis and the high uncertainty surrounding its effects. This provides a rationale for a stronger role of discretionary fiscal policy at national and European level. Over the medium term, fiscal policies could increasingly make use of quasi-automatic fiscal instruments that provide additional timely, targeted and temporary macroeconomic stabilisation for the euro area. Careful consideration should be given to the design of such instruments over the business cycle, their economic efficiency, and to the need for building fiscal buffers in good times.
- JEL Code:
- H12,H20,E63
- 23 September 2020
-
Economic Bulletin - ArticleEconomic Bulletin Issue 6, 2020Details
- Abstract:
- Adverse shocks induced by containment measures in response to the coronavirus (COVID-19) are not limited to the originating country. Foreign trade, while not the sole propagation mechanism, transmits these shocks across economies. In the euro area, the deep integration of firms within regional supply chains ‑ as well as strong final demand linkages ‑ acts as a magnifying mechanism. This article quantifies the propagation and impact of adverse shocks originating in the euro area on euro area GDP, foreign trade and trade balances. It concludes that the transmission to the rest of the euro area of a shock originating in one of the five largest Member States ranges from 15% to 28% of the original shock’s size. The negative spillover effects are most severe for open countries and those most intertwined in regional production network.
- JEL Code:
- F00,F15,F62
- 23 September 2020
-
Economic Bulletin - BoxEconomic Bulletin Issue 6, 2020Details
- Abstract:
- The EU’s recovery package represents an important milestone in European economic policy integration. The European financial support to be provided is intended to have a meaningful volume in macroeconomic terms, totalling almost 5% of euro area GDP. Moreover, the allocation key ensures stronger macroeconomic support for more vulnerable countries. This coordinated European policy response to COVID-19 is essential to avoid an uneven recovery and economic fragmentation while promoting economic resilience in Member States. Finally, the way that the EU has responded to the crisis also has implications for the implementation and future design of the European governance framework.
- JEL Code:
- F45,E62,H12
- 23 September 2020
-
InterviewDetails
- Subtitle:
- Interview with Yves Mersch, Member of the Executive Board of the ECB and Vice-Chair of the Supervisory Board of the ECB, conducted by Paul Gordon and Carolynn Look
- 22 September 2020
-
Weekly financial statementAnnexes
- 22 September 2020
-
Weekly financial statement - Commentary
- 22 September 2020
-
SpeechDetails
- Subtitle:
- Speech by Fabio Panetta, Member of the Executive Board of the ECB, at the meeting of the ECB Money Market Contact Group
- 22 September 2020
-
Press release
- 22 September 2020
-
Occasional Paper Series - Issue No. 247Details
- Abstract:
- This paper summarises the outcome of an analysis of stablecoins undertaken by the ECB Crypto-Assets Task Force. At the time of writing, the stablecoin debate lacks a common taxonomy and unambiguous terminology. This paper applies a definition that distinguishes stablecoins from existing forms of currencies – regardless of the technology used – and characterises stablecoin arrangements based on the functions they fulfil. This approach emphasises the role of technology-neutral regulation in preventing arbitrage, as well as comprehensive Eurosystem oversight, irrespective of stablecoins’ regulatory status. Against this background, this paper assesses stablecoins’ implications for the euro area based on three scenarios for the uptake of stablecoins: (i) as a crypto-assets accessory function; (ii) as a new payment method; and (iii) as an alternative store of value. While the first scenario is merely the continuation of the current state of the market and, thus far, has not posed concerns for the financial sector and/or central bank tasks, stablecoins of the type envisaged in the second scenario may reach a scale such that financial stability risks can become material, and the safety and efficiency of the payment system may be affected. The third scenario is both the least plausible and the most relevant from a monetary policy perspective. The paper concludes that the Eurosystem relies on appropriate regulation, oversight, and supervision to manage the implications of stablecoins (and the risks that stem from them) on its mandate and tasks under plausible scenarios. The Eurosystem continues monitoring the evolution of the stablecoin market and stands ready to respond to rapid changes in all possible scenarios.
- JEL Code:
- E42,G21,G23,O33
- 22 September 2020
-
Economic Bulletin - BoxEconomic Bulletin Issue 6, 2020Details
- Abstract:
- In response to COVID-19 the euro area household saving rate reached unprecedented levels in the first half of 2020. First, lockdown measures prohibited households from consuming a large share of their normal expenditure basket, leading to forced savings. Second, the sudden outbreak of the pandemic caused the risk of future unemployment to shoot up, leading to precautionary savings. Using a parsimonious panel model this box finds that forced savings have been the main driver of the recent spike in household savings. Despite these accumulated savings, however, households remain cautious about their future spending.
- JEL Code:
- E21,E32
- 22 September 2020
-
Economic Bulletin - BoxEconomic Bulletin Issue 6, 2020Details
- Abstract:
- The coronavirus (COVID-19) pandemic has triggered an unprecedented increase in uncertainty. This box shows how selected measures of uncertainty have evolved during the past few months and exploits the information embedded in the measure of macroeconomic uncertainty to assess its impact on economic activity. This is done by using a Bayesian vector autoregressive (BVAR) model which allows the dynamic effect of an uncertainty shock on the variable of interest to be estimated.
- JEL Code:
- C32,D80,E20,E27,E66
- 21 September 2020
-
SpeechDetails
- Subtitle:
- Introductory remarks by Christine Lagarde, President of the ECB, at the Franco-German Parliamentary Assembly, 21 September 2020
- 21 September 2020
-
Other publicationRelated
- 21 September 2020
- 21 September 2020
-
Press releaseRelated
- 21 September 2020
- 21 September 2020
-
Working Paper Series - Issue No. 2469Details
- Abstract:
- The Banking Euro Area Stress Test (BEAST) is a large scale semi-structural model developed to assess the resilience of the euro area banking system from a macroprudential perspective. The model combines the dynamics of a high number of euro area banks with that of the euro area economies. It reflects banks’ heterogeneity by replicating the structure of their balance sheets and profit and loss accounts. In the model, banks adjust their assets, interest rates, and profit distribution in line with the economic conditions they face. Bank responses feed back to the macroeconomic environment affecting credit supply conditions. When applied to a stress test of the euro area banking system, the model reveals higher system-wide capital depletion than the analogous constant balance sheet exercise.
- JEL Code:
- E37,E58,G21,G28
- 21 September 2020
-
Economic Bulletin - ArticleEconomic Bulletin Issue 6, 2020Details
- Abstract:
- This article will trace the decline and subsequent recovery of China’s economy following the outbreak of the coronavirus (COVID-19). It employs high-frequency data to assess the speed at which activity in different sectors of the economy is normalising after businesses were allowed to resume operations. One particular focus will be on differentiating between the industrial and services sectors, which are subject to different health and safety measures. The article finds that China’s economic activity rose from a trough of around 20% of normal levels in February 2020 to 90% in the span of just three months. While production capacity recovered swiftly, activity normalised more gradually in the services sector, where COVID-19 containment measures had continued to weigh heavily. The recovery was driven primarily by private domestic demand and the authorities’ policy response, as the normalisation in China coincided with the implementation of lockdown measures by many of its trading partners and hence also with a fall in external demand. Looking ahead, uncertainty and risks surrounding the recovery path remain exceptionally high, owing in large part to the uncertainty regarding how the COVID-19 pandemic will develop and if and when a medical solution to the virus can be found.
- JEL Code:
- E2,E5,E6,F1,G1
- 20 September 2020
-
InterviewDetails
- Subtitle:
- Interview with Luis de Guindos, Vice-President of the ECB, conducted by Jesús Rivasés on 14 September 2020
- 18 September 2020
-
SpeechDetails
- Subtitle:
- Speech by Isabel Schnabel, Member of the Executive Board of the ECB, at the panel discussion “Verteilung der Lasten der Pandemie” (“Sharing the burden of the pandemic”), Deutscher Juristentag 2020
Annexes- 18 September 2020
-
Speech
- 18 September 2020
-
Working Paper Series - Issue No. 2468Details
- Abstract:
- We consider simple methods to improve the growth nowcasts and forecasts obtained by mixed frequency MIDAS and UMIDAS models with a variety of indicators during the Covid-19 crisis and recovery period, such as combining forecasts across various specifications for the same model and/or across different models, extending the model specification by adding MA terms, enhancing the estimation method by taking a similarity approach, and adjusting the forecasts to put them back on track by a specific form of intercept correction. Among all these methods, adjusting the original nowcasts and forecasts by an amount similar to the nowcast and forecast errors made during the financial crisis and following recovery seems to produce the best results for the US, notwithstanding the different source and characteristics of the financial crisis. In particular, the adjusted growth nowcasts for 2020Q1 get closer to the actual value, and the adjusted forecasts based on alternative indicators become much more similar, all unfortunately indicating a much slower recovery than without adjustment and very persistent negative effects on trend growth. Similar findings emerge also for the other G7 countries.
- JEL Code:
- C53,E37
- 18 September 2020
-
InterviewDetails
- Subtitle:
- Interview with Christine Lagarde, President of the ECB, conducted by Jean-Pierre de La Rocque
- 18 September 2020
-
Balance of payments (monthly)
- 17 September 2020
- 17 September 2020
-
Research Bulletin - Issue No. 74Details
- Abstract:
- The analysis of inflation dynamics and their possible changes over time is a key input in the design of monetary policy, particularly in the context of the strategy reviews recently undertaken by the Federal Reserve System and currently under way at the European Central Bank and other central banks. In this article, we study the causes of the stability of US inflation over the business cycle since the 1990s. We conclude that it is mainly due to a reduced sensitivity of firms’ pricing decisions to their cost pressures. Ignoring this observation could impair the ability of monetary policy to steer inflation toward its objective.
- JEL Code:
- E31,E32,E37,E52
- 16 September 2020
-
InterviewDetails
- Subtitle:
- Interview with Isabel Schnabel, Member of the Executive Board of the ECB, conducted by Jean-Philippe Lacour
- 15 September 2020
-
Weekly financial statementAnnexes
- 15 September 2020
-
Weekly financial statement - Commentary
- 15 September 2020
-
SpeechDetails
- Subtitle:
- Speech by Fabio Panetta, Member of the Executive Board of the ECB, at the 24th Economist Roundtable with the Government of Greece
- 14 September 2020
-
Working Paper Series - Issue No. 2467Details
- Abstract:
- Between January 2017 and March 2020 a coalition of oil producers led by OPEC and Russia (known as OPEC+) cut oil production in an attempt to raise the price of crude oil. In March 2020 the corona virus shock led to a collapse of this coalition, as members did not agree on keeping the oil market tight in the face of a large negative demand shock. Yet, was OPEC+ actually effective in sustaining the price of oil? Between 2017 and early 2020 when the OPEC+ strategy was in place, oil inventories fell substantially and the price of oil reached a peak of around 80 USD per barrel, from a minimum of 30 USD in 2016. This suggests that the OPEC+ strategy had a significant impact on the global oil market. Yet, to what extent did crude prices actually reflect OPEC+ production cuts rather than other factors, like swings in demand for oil? How would the price of oil have evolved had OPEC+ not cut supply? This paper provides an answer to these questions through a counterfactual analysis based on two structural models of the global oil market. We find the impact of OPEC+ on the market was overall quite limited, owing to significant deviations from the assigned quotas. On average, without the OPEC+ cuts, the price of oil would have been 6 percent (4 USD) lower.
- JEL Code:
- Q43,C53
- 14 September 2020
- 13 September 2020
-
SpeechDetails
- Subtitle:
- Contribution by Christine Lagarde, President of the ECB, during the session “Economic, financial and monetary impact of COVID-19 pandemic, and post-crisis options for policies and tools”
- 11 September 2020
-
SpeechDetails
- Subtitle:
- Introductory statement by Yves Mersch, Member of the Executive Board of the ECB and Vice-Chair of the Supervisory Board of the ECB, at the Eurofi Financial Forum in Berlin
- 11 September 2020
-
Working Paper Series - Issue No. 2466Details
- Abstract:
- We characterise the distribution of expected GDP growth during the Great Influenza Pandemic (known also as Spanish Flu) using a non-linear method in a country panel setting. We show that there are non-negligible risks of large GDP losses with the 5% left tail of the distribution suggesting a drop in the typical country's real per capita GDP equal to 29.1% in 1918, 10.9% in 1919 and 3.6% in 1920. Moreover, the fall in per capita GDP after the Spanish FLu was on average particularly large in low-income countries. Particularly, the size of the GDP drop in the lower tail of the distributions is high for higher income countries and immense for lower income countries. As for the United States, the estimated size of the recession in the lower tail of the distribution following the Spanish Flu is not negligible.
- JEL Code:
- E3,I0
- 11 September 2020
-
Working Paper Series - Issue No. 2465Details
- Abstract:
- This study analyses the policy measures taken in the euro area in response to the outbreak and the escalating diffusion of new coronavirus (COVID-19) pandemic. We focus on monetary, microprudential and macroprudential policies designed specifically to support bank lending conditions. For identification, we use proprietary data on participation in central bank liquidity operations, high-frequency reactions to monetary policy announcements, and confidential supervisory information on bank capital requirements. The results show that in the absence of the funding cost relief and capital relief associated with the pandemic response measures, banks’ ability to supply credit would have been severely affected. The results also indicate that the coordinated intervention by monetary and prudential authorities amplified the effects of the individual measures in supporting liquidity conditions and helping to sustain the flow of credit to the private sector. Finally, we investigate the potential real effects of the joint pandemic response measures by estimating the adjustment in labour input variables for firms that in the past have been more exposed to similar policies. We find that, in absence of monetary and prudential policies, the pandemic would lead to a significantly larger decline in firms’ employment.
- JEL Code:
- E51,E52,E58,G01,G21,G28
- 11 September 2020
-
SpeechDetails
- Subtitle:
- Speech by Isabel Schnabel, Member of the Executive Board of the ECB, at the Centre for European Reform and the Eurofi Financial Forum on “Is the current ECB monetary policy doing more harm than good and what are the alternatives?”
Annexes- 11 September 2020
-
Speech
- 11 September 2020
-
Payment instruments and systemsAnnexes
- 11 September 2020
-
Payment instruments and systems
- 11 September 2020
-
The ECB BlogDetails
- Subtitle:
- Our current measures are providing crucial support to the economic recovery in the euro area, writes Chief Economist Philip R. Lane. But there is no room for complacency as inflation remains far below the aim and risks continue to be tilted to the downside.
- 10 September 2020
-
SpeechDetails
- Subtitle:
- Speech by Christine Lagarde, President of the ECB, at the Deutsche Bundesbank online conference on banking and payments in the digital world
- 10 September 2020
-
Macroeconomic projections for the euro areaAnnexes
- 10 September 2020
-
Macroeconomic projections for the euro area
- 10 September 2020
-
Monetary policy statementDetails
- Subtitle:
- Christine Lagarde, President of the ECB,Luis de Guindos, Vice-President of the ECB,Frankfurt am Main, 10 September 2020
- 10 September 2020
-
Monetary policy decision
- 10 September 2020
-
Euro area securities issues statistics
- 8 September 2020
-
Weekly financial statementAnnexes
- 8 September 2020
-
Weekly financial statement - Commentary
- 2 September 2020
- 2 September 2020
- 2 September 2020
- 2 September 2020
- 2 September 2020
- 2 September 2020
-
The ECB BlogDetails
- Subtitle:
- The coronavirus crisis makes progress on capital markets union even more important, write Luis de Guindos, Fabio Panetta and Isabel Schnabel. In the light of the European Commission’s forthcoming Action Plan, they outline priority areas for reform to foster European capital markets.
- 2 September 2020
-
MFI interest rate statistics
- 1 September 2020
-
Weekly financial statementAnnexes
- 1 September 2020
-
Weekly financial statement - Commentary
- 31 August 2020
-
InterviewDetails
- Subtitle:
- Interview with Isabel Schnabel, Member of the Executive Board of the ECB, conducted by Balazs Koranyi and Frank Siebelt on 28 August 2020 and published on 31 August 2020
- 31 August 2020
-
Working Paper Series - Issue No. 2464Details
- Abstract:
- This paper studies the role of the International Monetary Fund (IMF) in promoting central bank independence (CBI). While anecdotal evidence suggests that the IMF has been playing a vital role for CBI, the underlying mechanisms of this influence are not well understood. We argue that the IMF has ulterior motives when pressing countries for increased CBI. First, IMF loans are primarily transferred to local monetary authorities. Thus, enhancing CBI aims to insulate central banks from political interference to shield loan disbursements from government abuse. Second, several loan conditionality clauses imply a substantial transfer of political leverage over economic policy making to monetary authorities. As a result, the IMF through pushing for CBI seeks to establish a politically insulated veto player to promote its economic policy reform agenda. We argue that the IMF achieves these aims through targeted lending conditions. We hypothesize that the inclusion of these loan conditions leads to greater CBI. To test our hypothesis, we compile a unique dataset that includes detailed information on CBI reforms and IMF conditionality for up to 124 countries between 1980 and 2014. Our findings indicate that targeted loan conditionality plays a critical role in promoting CBI. These results are robust towards varying modeling assumptions and withstand a battery of robustness checks.
- JEL Code:
- E52,E58,F5
- 31 August 2020
-
Working Paper Series - Issue No. 2463Details
- Abstract:
- The Federal Reserve responded to the global financial crisis by initiating an unprecedented expansion of central bank money (bank reserves) once the policy rate had reached the lower bound. To capture the salient features of the crisis, we develop a model where the central bank can provide reserves on demand and also use reserves to buy government bonds. We show that the provision of reserves through either channel reduces the cost of providing loans as they act as a substitute for private sector collateral and costly monitoring activity. We illustrate this mechanism by examining the role of reserves in projecting stable growth in broad money after the financial crisis. We also run a counterfactual which suggests that, if the Federal Reserve had not provided bank reserves on such a large scale, broad money would have fallen, the economy might have experienced a deeper contraction, and the recovery would have been more protracted, taking perhaps twice as long to return to equilibrium.
- JEL Code:
- E31,E40,E51
- 31 August 2020
-
Euro area insurance corporations statisticsAnnexes
- 30 August 2020
-
Euro area insurance corporations statistics
- 28 August 2020
-
Press release
- 28 August 2020
-
Working Paper Series - Issue No. 2462Details
- Abstract:
- The paper inspects the credit impact of policy instruments that are commonly applied to contain systemic risk. It employs detailed information on the use of capital-based, borrower-based and liquidity-based instruments in 28 European Union countries in 1995—2017 and a macroeconomic panel setup. The paper finds a significant impact of capital buffers, profit distribution restrictions, specific and general loan-loss provisioning regulations, sectoral risk weights and exposure limits, borrower-based measures, caps on long-term maturity and exchange rate mismatch, and asset-based capital requirements on credit to the non-financial private sector. Furthermore, the business cycle and monetary policy influence the effectiveness of most of the macroprudential instruments. Therein, capital buffers and sectoral risk weights act countercyclically irrespectively of the prevailing monetary policy stance, while a far richer set of policy instruments can act countercyclically in combination with the appropriate monetary policy stance.
- JEL Code:
- E51,E52,G21
- 27 August 2020
-
InterviewDetails
- Subtitle:
- Interview with Philip R. Lane, Member of the Executive Board of the ECB, conducted by Steve Liesman on 27 August 2020 and broadcast on 27 August 2020
- 27 August 2020
-
SpeechDetails
- Subtitle:
- Speech by Philip R. Lane, Member of the Executive Board of the ECB, at the Jackson Hole Economic Policy Symposium, Federal Reserve Bank of Kansas City “Navigating the Decade Ahead: Implications for Monetary Policy”
- 27 August 2020
- 27 August 2020
-
Monetary developments in the euro areaAnnexes
- 27 August 2020
-
Monetary developments in the euro area
- 26 August 2020
-
SpeechDetails
- Subtitle:
- Speech by Isabel Schnabel, Member of the Executive Board of the ECB, at the Roundtable on Monetary Policy, Low Interest Rates and Risk Taking at the 35th Congress of the European Economic Association
Annexes- 26 August 2020
-
Speech
- 26 August 2020
-
Working Paper Series - Issue No. 2461Details
- Abstract:
- This paper illustrates how to handle a sequence of extreme observations—such as those recorded during the COVID-19 pandemic—when estimating a Vector Autoregression, which is the most popular time-series model in macroeconomics. Our results show that the ad-hoc strategy of dropping these observations may be acceptable for the purpose of parameter estimation. However, disregarding these recent data is inappropriate for forecasting the future evolution of the economy, because it vastly underestimates uncertainty.
- JEL Code:
- C32,E32,E37,C11
- 26 August 2020
-
Working Paper Series - Issue No. 2460Details
- Abstract:
- We provide evidence that industries' supply curves are convex. To guide our empirical analysis, we develop a model, in which capacity constraints at the plant level generate convex supply curves at the industry level. The industry's capacity utilization rate is a sufficient statistic for the supply elasticity. Using data on capacity utilization and three different instruments, we estimate the supply curve and find robust evidence for an economically sizable degree of convexity. The nonlinearity we identify has several macroeconomic implications: Responses to shocks are state-dependent, the Phillips curve is convex, and higher welfare costs of business cycles than Lucas (1987).
- JEL Code:
- E22,E32,E52,E62,F44
- Network:
- ECB Lamfalussy Fellowship Programme
- 25 August 2020
-
Weekly financial statementAnnexes
- 25 August 2020
-
Weekly financial statement - Commentary
- 25 August 2020
-
Working Paper Series - Issue No. 2459Details
- Abstract:
- This paper quantifies the economic influence that shocks to EMU cohesion, which in turn reflect the incomplete nature of the monetary union, have on the rest of the world. Disentangling euro area stress shocks and global risk aversion shocks based on a combination of sign, magnitude and narrative restrictions in a daily Structural Vector Autoregression (VAR) model with financial variables. We find that the effects of euro area stress shocks are significant not only for the euro area but also for the rest of the world. Notably, an increase in euro area stress entails a slowdown of economic activity in the rest of the world, as well as a fall in imports/exports of both the euro area and the rest of the world. A decrease in euro area stress has somewhat more widespread beneficial effects on both economic performance and global trade activity.
- JEL Code:
- C23,C32,F02,F33
- 24 August 2020
-
Survey of Monetary Analysts
- 21 August 2020
-
Survey on credit terms and conditions in euro-denominated securities financing and OTC derivatives marketsAnnexes
- 21 August 2020
-
Other publication
- 21 August 2020
-
Other publication
- 21 August 2020
-
Press releaseRelated
- 21 August 2020
- 20 August 2020
-
Monetary policy account
- 20 August 2020
- 19 August 2020
-
The ECB BlogDetails
- Subtitle:
- The ECB’s swap and repo lines are essential stabilising tools in the coronavirus crisis. In a joint Blog post, Executive Board members Fabio Panetta and Isabel Schnabel explain how these tools reduce funding risks, prevent financial contagion and support the euro’s use in global transactions.
- 19 August 2020
-
Balance of payments (monthly)
- 18 August 2020
-
Weekly financial statementAnnexes
- 18 August 2020
-
Weekly financial statement - Commentary
- 18 August 2020
-
Working Paper Series - Issue No. 2458Details
- Abstract:
- This paper examines which measures of financial conditions are informative about the tail risks to output growth in the euro area. The Composite Indicator of Systemic Stress (CISS) is more informative than indicators focusing on narrower segments of financial markets or their simple aggregation in the principal component. Conditionally on the CISS one can reproduce for the euro area the stylized facts known from the US, such as the strong negative correlation between conditional mean and conditional variance that generates stable upper quantiles and volatile lower quantiles of output growth.
- JEL Code:
- C12,E37,E44
- 18 August 2020
-
Working Paper Series - Issue No. 2457Details
- Abstract:
- This paper shows that individual beliefs on the effectiveness of formal and informal sources of risk sharing determine financial precautionary behavior. We present empirical evidence demonstrating that higher trust in public insurance systems reduces net liquid wealth while higher trust in communal insurance increases it. This dichotomy is consistent with theories on access to private risk sharing networks. Moreover, we find that both types of trust associate positively with the probability to take on financial risk for the purpose of becoming a homeowner and the related loan-to-value ratio. Our findings are robust across a wide range of econometric controls and specifications.
- JEL Code:
- D14,D31,E71,G5
- Network:
- Household Finance and Consumption Network (HFCN)
- 18 August 2020
- 18 August 2020
- 17 August 2020
-
Euro area investment fund statisticsAnnexes
- 17 August 2020
-
Euro area investment fund statistics
- 17 August 2020
-
Euro area financial vehicle corporation statisticsAnnexes
- 17 August 2020
-
Euro area financial vehicle corporation statistics
- 14 August 2020
-
Working Paper Series - Issue No. 2456Details
- Abstract:
- This paper presents the most comprehensive and up-to-date panel data set of invoicing currencies in global trade. It provides data on the shares of exports and imports invoiced in US dollars, euros, and other currencies for more than 100 countries since 1990. The evidence from these data confirms findings from earlier research regarding the globally dominant role of the US dollar in invoicing – despite the comparatively smaller role of the US in global trade – and the overall stability of invoicing currency patterns. But the evidence also points to several novel stylised facts. First, both the US dollar and the euro have been increasingly used for invoicing even as the share of global trade accounted for by the US and the euro area has declined. Second, the euro is used as a vehicle currency in parts of Africa, and some European countries have seen significant shifts toward euro invoicing. And third, as suggested by the dominant currency paradigm, countries invoicing more in US dollars (euros) tend to experience greater US dollar (euro) exchange rate pass-through to their import prices; also, their trade volumes are more sensitive to fluctuations in these exchange rates.
- JEL Code:
- F14,F31,F44
- 14 August 2020
-
Working Paper Series - Issue No. 2455Details
- Abstract:
- This paper presents a framework for analysing the evolution of the structural government deficit estimated using the official EU methodology relevant for the Stability and Growth Pact. The focus of our framework lies in the analysis of the main driving forces of changes in estimated structural government revenue, including the impact of changes to tax legislation, fiscal drag (caused e.g. by the non-indexation of income tax brackets), the composition of economic growth, and a residual. This approach allows us to scrutinise estimates of discretionary revenue measures and fiscal elasticities, both of which play a crucial role in the current EU fiscal governance framework. Between 2010 and 2018, Germany's structural revenue ratio increased substantially even though the estimated impact of changes to tax legislation was close to zero. In most other larger euro area countries, by contrast, structural revenue performed worse than could have been expected based on the estimated impact of discretionary revenue measures. Our approach shows that the composition of economic growth was unfavorable for generating revenue in all analysed countries over this time span. Moreover, in most countries actual revenue grew by less than what could have been expected in view of the discretionary measures taken and developments in the macroeconomic aggregates used to approximate tax bases.
- JEL Code:
- H3,H6,E32,E62
- 14 August 2020
-
Card fraud report
- 12 August 2020
-
Working Paper Series - Issue No. 2454Details
- Abstract:
- Since the onset of the Global Financial Crisis, the presence of institutional investors in housing markets has steadily increased over time. Real estate funds (REIFs) and other housing investment firms leverage large-scale buy-to-rent investments in real estate assets that enable them to set prices in rental housing markets. A significant fraction of this funding is being provided in the form of non-bank lending (i.e., lending that is not subject to regulatory LTV limits). I develop a quantitative two-sector DSGE model that incorporates the main features of the real estate fund industry in the current context to study the effectiveness of dynamic LTV ratios as a macroprudential tool. Despite the comparatively low fraction of total property and debt held by REIFs, optimized LTV rules limiting the borrowing capacity of such funds are more effective in smoothing property prices, credit and business cycles than those affecting (indebted) households – borrowing limit. This finding is remarkably robust across alternative calibrations (of key parameters) and specifications of the model. The underlying reason behind such an important and unexpectedly robust finding relates to the strong interconnectedness of REIFs with various sectors of the economy.
- JEL Code:
- E44,G23,G28
- 12 August 2020
-
Working Paper Series - Issue No. 2453Details
- Abstract:
- Monitoring economic conditions in real time, or nowcasting, is among the key tasks routinely performed by economists. Nowcasting entails some key challenges, which also characterise modern Big Data analytics, often referred to as the three \Vs": the large number of time series continuously released (Volume), the complexity of the data covering various sectors of the economy, published in an asynchronous way and with different frequencies and precision (Variety), and the need to incorporate new information within minutes of their release (Velocity). In this paper, we explore alternative routes to bring Bayesian Vector Autoregressive (BVAR) models up to these challenges. We find that BVARs are able to effectively handle the three Vs and produce, in real time, accurate probabilistic predictions of US economic activity and, in addition, a meaningful narrative by means of scenario analysis.
- JEL Code:
- E32,E37,C01,C33,C53
- 12 August 2020
-
Euro area securities issues statistics
- 11 August 2020
-
Weekly financial statementAnnexes
- 11 August 2020
-
Weekly financial statement - Commentary
- 11 August 2020
-
Working Paper Series - Issue No. 2452Details
- Abstract:
- Corporate bond returns in the major developed economies increase with risk, as measured by maturity and ratings. From a pricing perspective, we find little to no evidence against the World CAPM model, where the market consists out of equity, sovereign and corporate bonds. However, from a factor model perspective, local factors contribute substantially more to the variation of corporate bond returns than global factors. The factor exposures show intuitive patterns: as ratings worsen, equity betas show a hockey stick pattern, sovereign betas decline monotonically and corporate bond betas increase steeply.
- JEL Code:
- G10,G11,G15
- 11 August 2020
-
Working Paper Series - Issue No. 2451Details
- Abstract:
- In this paper we assess the merits of financial condition indices constructed using simple averages versus a more sophisticated alternative that uses factor models with time varying parameters. Our analysis is based on data for 18 advanced and emerging economies at a monthly frequency covering about 70% of the world’s GDP. We use four criteria to assess the performance of these indicators, namely quantile regressions, Structural Vector Autoregressions, the ability of the indices to predict banking crises and their response to US monetary policy shocks. We find that averaging across the indicators of interest, using judgemental but intuitive weights, produces financial condition indices that are not inferior to, and actually perform better than, those constructed with more sophisticated statistical methods.
- JEL Code:
- E32,E44,C11,C55
- 11 August 2020
-
Euro money market statistics
- 6 August 2020
-
Economic Bulletin - BoxEconomic Bulletin Issue 6, 2020Details
- Abstract:
- This box reviews the recent decision on the inclusion of the Bulgarian lev and the Croatian kuna in ERM II from a historical, institutional, policy and economic perspective. It explains the key features of ERM II, describes the process and rationale underlying the decision, including the prior and post‑ERM II entry policy commitments made by the Bulgarian and Croatian authorities, and explains the key elements that were taken into consideration when defining the central rate of the lev and the kuna against the euro in the exchange rate mechanism.
- JEL Code:
- F02,F31
- 4 August 2020
-
Weekly financial statementAnnexes
- 4 August 2020
-
Weekly financial statement - Commentary
- 4 August 2020
-
The ECB BlogDetails
- Subtitle:
- While there has been some rebound in economic activity, the level of economic slack remains extraordinarily high and the outlook highly uncertain, writes Chief Economist Philip R. Lane. Progress in containing the virus will be central in determining the size and speed of the recovery.
- 3 August 2020
-
€STR Transparency on errors
- 2 August 2020
-
Other publication
- 2 August 2020
-
Other publication
- 2 August 2020
-
Other publication
- 2 August 2020
-
Other publication
- 31 July 2020
-
Governing Council decisions - Other decisions
- 31 July 2020
-
Euro area pension fund statisticsAnnexes
- 31 July 2020
-
Euro area pension fund statistics
- 31 July 2020
-
MFI interest rate statistics
- 31 July 2020
-
InterviewDetails
- Subtitle:
- Interview with Christine Lagarde, conducted by Dominique Lecoq and Marc Aubault on 29 July and published on 31 July
- 30 July 2020
-
Economic Bulletin
- 30 July 2020
-
Economic Bulletin - ArticleEconomic Bulletin Issue 5, 2020Details
- Abstract:
- This article analyses how liquidity is distributed across jurisdictions in TARGET2 – the payment system owned and operated by the Eurosystem – and the implications for payment settlement. It discusses TARGET2 participants’ reliance on intraday credit and the time of payment settlement, which are important aspects for the payment system operator. The article documents considerable heterogeneity across countries in liquidity holdings, concentration of liquidity among participants, usage of the intraday credit facility and time of settlement. A panel study across countries shows that larger holdings of liquidity are associated with a lower use of the credit line and an earlier time of settlement.
- JEL Code:
- G20,G21
- 30 July 2020
-
Economic Bulletin - BoxEconomic Bulletin Issue 5, 2020Details
- Abstract:
- Qualitative indications from banks on firms’ loan demand and actual loan growth generally correlate with developments in real economic variables. However, during the coronavirus (COVID-19) pandemic, longer-term lending seems to have decoupled from developments in fixed investment. Owing in part to sizeable monetary and fiscal policy support measures, firms’ demand for longer-term loans has increased, while their financing need for fixed investment has declined. By contrast, developments in short-term loans for firms continue to co-move closely with their loan demand for working capital, owing to their acute liquidity needs during the pandemic. Loan demand increased more strongly for small and medium-sized enterprises (SMEs) than for large firms in the second quarter of 2020, benefiting substantially from the policy support measures for bank lending during the pandemic. Developments across economic sectors have been heterogeneous during the pandemic. In the sectors most affected by the crisis, demand for bank loans increased considerably, while value added dropped. The decline in gross value added in the manufacturing sector is particularly relevant in explaining the fall in business investment during the pandemic. While some degree of recovery in investment activity is expected in the second half of 2020, the end of fiscal support schemes in some countries may lead to renewed fears about the creditworthiness of borrowers. Overall, the continuation of a supportive policy environment in the near future will be crucial in preserving favourable financing conditions and facilitating the flow of credit to firms.
- JEL Code:
- E2,E22,E32,E44,E5,E52,G21
- 30 July 2020
-
Economic Bulletin - BoxEconomic Bulletin Issue 5, 2020Details
- Abstract:
- This box examines the impact of the ECB’s monetary policy measures taken in response to the coronavirus (COVID-19) crisis, focusing on asset purchases and the targeted longer-term refinancing operations (TLTRO III). It outlines how the ECB’s response centred on addressing three key issues: (i) market stabilisation, (ii) providing central bank liquidity to maintain credit provision to the real economy, and (iii) ensuring that the overall monetary policy stance is sufficiently accommodative. The box sets out in detail how the ECB’s measures have indeed proved an effective and efficient response to the COVID-19 crisis, in turn providing crucial support to the real economy and to price stability across two dimensions, namely underpinning the medium-term growth and inflation outlook and removing tail risks around the baseline outlook. These measures are a proportionate response under current conditions given that the ECB’s price stability objective would have been subject to further downside risks in the absence of such measures.
- JEL Code:
- E50,E52,E58
- 30 July 2020
-
Economic Bulletin - BoxEconomic Bulletin Issue 5, 2020Details
- Abstract:
- This box provides evidence on the positive impact of the Eurosystem’s US dollar-providing operations on the functioning of the EUR/USD foreign exchange (FX) swap market, using ECB Money Market and Statistical Reporting (MMSR) transaction data. In the context of high market volatility and risk aversion due to the coronavirus (COVID-19) pandemic, US dollar funding conditions tightened notably from the end of February 2020, when supply-demand imbalances led to a deterioration of liquidity conditions and eventually a surge in US dollar funding premia. The enhancement of the central bank swap lines on 18 March, by introducing a new 84-day US dollar operation in addition to the existing 7-day tender and lowering the price of all US dollar operations, brought significant relief to the short-term US dollar funding conditions. However, the relief was short-lived and it was only with the introduction of daily operations on 23 March that conditions improved in a sustainable manner and across all maturities, as uncertainty about US dollar availability abated. Once US dollar funding conditions started to normalise, the Eurosystem’s US dollar operations gradually lost their appeal, as seen in the significant drop in participation. This box shows that the Eurosystem’s US dollar operations not only helped banks to satisfy their immediate US dollar funding needs but also supported market activity, as banks participating in the US dollar operations became more willing to intermediate and passed funds borrowed from the Eurosystem on to other market participants. This in turn contributed to the normalisation of US dollar funding conditions and highlights an important transmission channel of the central bank swap lines.
- JEL Code:
- E5,E4,G1,D53
- 29 July 2020
-
Occasional Paper Series - Issue No. 246Details
- Abstract:
- Cross-border financial integration has increased the need to make suitable multilateral arrangements for global financial cooperation and oversight – these include more intense and more effective financial sector surveillance by the International Monetary Fund (IMF). The financial sector has a crucial role to play in addressing today’s global health emergency, and it is important that it remains sufficiently resilient to facilitate the prompt return to more orderly economic conditions worldwide.
- 29 July 2020
-
Economic Bulletin - ArticleEconomic Bulletin Issue 5, 2020Details
- Abstract:
- With the ageing of the baby boom generation, the population share of the older working-age cohort, i.e. those between 55 and 74 years, has been gradually increasing. This age group has also seen a considerable rise in the labour force participation rate. This article examines the reasons behind the increase across euro area countries. Most euro area countries adopted substantial pension reforms in the last two decades to reduce risks to long-term fiscal sustainability. These pension reforms, complemented by other labour market reforms, can be expected to have boosted the labour force participation rate of older workers. While other factors, like better health conditions, rising life expectancy, higher educational levels, mainly among women, rising net wealth and labour market conditions have likely contributed, they alone cannot explain the particularly sharp rebound in the participation rate of older workers since 2000. The macroeconomic shock due to the on-going lock-down measures may, however, put further increases of the labour force participation rate at risk.
- JEL Code:
- J11,J14,J21,J26,H55
- 29 July 2020
-
Economic Bulletin - BoxEconomic Bulletin Issue 5, 2020Details
- Abstract:
- This box examines high-frequency data to quantify the impact of the coronavirus (COVID-19) pandemic on both job postings and hiring patterns in the euro area. Prior to the COVID-19 crisis, both of these indicators had increased steadily year on year, reflecting a rise in the number of job findings in the euro area. However, both the Indeed job postings and the LinkedIn hiring rate have declined significantly since the onset of the COVID-19 crisis and the lockdowns, with the hiring rate bottoming out in May 2020. While the decline in the hiring rate was broad-based across sectors, the intensity of the COVID-19 shock is asymmetric, with sectors such as recreation, travel and manufacturing being more affected by the crisis than others, such as healthcare, software and IT services sectors. Based on the high-frequency information derived from the hiring rate, the implied unemployment rate is expected to peak during the second quarter of 2020 and to be around 2.3 percentage points higher than in February. Overall, the methodology and the high-frequency data used in this box allow for a timely assessment of developments in the euro area labour market. The use of job flows in and out of unemployment helps to enhance our understanding of the labour market adjustment during the current COVID-19 crisis.
- JEL Code:
- E24,E27
- 29 July 2020
-
Economic Bulletin - BoxEconomic Bulletin Issue 5, 2020Details
- Abstract:
- This box analyses labour market developments in the euro area since the onset of the coronavirus (COVID-19) pandemic, contrasting the developments in business and consumer survey data with the main headline labour market indicators for the euro area. On the one hand, business and consumer survey data point to a strong deterioration in the euro area labour market since the introduction of the containment measures to limit the spread of the virus. On the other hand, the extensive margin of the labour market has shown a muted response, with both employment and unemployment adjusting moderately to the COVID-19 shock. The adjustment of the euro area labour market is occurring instead via a strong decline in the average number of hours worked per employed person, shaped by the widespread use of short-time work schemes in the euro area. These schemes have been successful in containing dismissals, supporting incomes and helping firms to effectively reduce their payroll costs and liquidity needs, while maintaining the worker-job relationship. However, the continued success of the widespread use of short-term work schemes in supporting the euro area labour market depends critically on the dynamics and duration of the crisis.
- JEL Code:
- E24,E65
- 28 July 2020
-
Weekly financial statementAnnexes
- 28 July 2020
-
Weekly financial statement - Commentary
- 28 July 2020
-
Euro area economic and financial developments by institutional sector (full)
- 28 July 2020
-
Economic Bulletin - BoxEconomic Bulletin Issue 5, 2020Details
- Abstract:
- Food prices are an important driver of euro area HICP due to their sizeable share in the consumption basket and their volatility. This box reviews the food price increases in April 2020 and finds that they were unusual in terms of their size and the circumstances surrounding them. The developments in April 2020 most likely reflected strong increases in demand combined with supply-side effects related to the lockdown and containment measures caused by the coronavirus (COVID-19) pandemic. Owing to strong food sector supply linkages within the euro area, the disruption of supply chains within the euro area observed during the COVID-19 pandemic may have had important implications for the food supply and consumer prices. To conclude, the box highlights that, while the May and preliminary June data show signs of normalisation in price changes, the possibility remains of upside price pressures in the short term and downside price pressures in the medium term.
- JEL Code:
- E31
- 28 July 2020
-
Economic Bulletin - BoxEconomic Bulletin Issue 5, 2020Details
- Abstract:
- After a pronounced decline until mid-April 2020, near-term earnings growth expectations derived from surveys and derivatives pricing in euro area equity markets appear to have troughed as the economic recovery is expected to gradually take hold. At the same time, a number of indicators show that investors remain concerned about a more protracted weakness in the euro area economy. Moreover, and despite a significant improvement since the announcement of the pandemic emergency purchase programme (PEPP), market participants continue to price significant downside risks in equity markets in a highly uncertain environment. Nevertheless, equity prices continue to increase against the backdrop of a stabilisation in risk sentiment, global policy support, and the fact that tail risks of an imminent global financial crisis have faded to some extent. However, if current expectations of a recovery in earnings turn out to be overly optimistic, there will be substantial risks of significant renewed declines in equity prices.
- JEL Code:
- E44,E52,G12,G15
- 27 July 2020
-
Monetary developments in the euro areaAnnexes
- 27 July 2020
-
Monetary developments in the euro area
- 27 July 2020
-
Economic Bulletin - ArticleEconomic Bulletin Issue 5, 2020Details
- Abstract:
- The article explores the behaviour and characteristics of durable goods consumption in the euro area, including an examination of the degree of heterogeneity among the euro area’s largest countries, and offers a perspective based on business cycle turning points. It also covers the relevance of financing conditions, including a specific focus on car purchases, as well as long-run trends in relative price and shares of durable goods in consumption. The analysis is complemented by insights from an empirical (structural VAR) model as described in Casalis and Krustev (2020, ECB Working Paper Series, No 2386), which sheds further light on the importance of durable goods-specific factors, alongside more traditional factors, in driving consumption.
- JEL Code:
- E21,E32
- 27 July 2020
-
Economic Bulletin - BoxEconomic Bulletin Issue 5, 2020Details
- Abstract:
- The world economy is facing an unprecedented shock, and as the impact of the pandemic unfolds, world trade will be hit particularly hard. Global value chain linkages are likely to magnify the impact. This box assesses the effects of disruptions associated with the COVID-19 pandemic and provides estimates of the impact on world trade. We find that GVC spillovers could significantly amplify the decline in world trade.
- JEL Code:
- F31,F41,F60
- 27 July 2020
-
InterviewDetails
- Subtitle:
- Interview with Fabio Panetta, Member of the Executive Board of the ECB, conducted by Tonia Mastrobuoni and published on 27 July 2020
- 26 July 2020
-
Other publication
- 26 July 2020
-
InterviewDetails
- Subtitle:
- Interview with Luis de Guindos, Vice-President of the ECB, conducted by Casimiro García Abadillo on 21 July 2020 and published on 26 July 2020
- 24 July 2020
-
Working Paper Series - Issue No. 2450Details
- Abstract:
- The paper reviews the economic risks associated with regimes of high public debt through DSGE model simulations. The large public debt build-up following the 2009 global financial and economic crisis acted as a shock absorber for output, while in the recent and more severe COVID19-crisis, an increase in public debt is even more justified given the nature of the crisis. Yet, once the crisis is over and the recovery firmly sets in, keeping debt at high levels over the medium term is a source of vulnerability in itself. Moreover, in the euro area, where monetary policy focuses on the area-wide aggregate, countries with high levels of indebtedness are poorly equipped to withstand future asymmetric shocks. Using three large scale DSGE models, the simulation results suggest that high-debt economies (1) can lose more output in a crisis, (2) may spend more time at the zero-lower bound, (3) are more heavily affected by spillover effects, (4) face a crowding out of private debt in the short and long run, (5) have less scope for counter-cyclical fiscal policy and (6) are adversely affected in terms of potential (long-term) output, with a significant impairment in case of large sovereign risk premia reaction and use of most distortionary type of taxation to finance the additional debt burden in the future. Going forward, reforms at national level, together with currently planned reforms at the EU level, need to be timely implemented to ensure both risk reduction and risk sharing and to enable high debt economies address their vulnerabilities.
- JEL Code:
- E62,H63,O40,E43
- 24 July 2020
-
Working Paper Series - Issue No. 2449Details
- Abstract:
- The paper evaluates the impact of a phased-in introduction of capital requirements on equity, risk-taking, and probability of default for a sample of European systemically important banks. Contrary to the case of a one-off introduction of capital requirements, this study does not find evidence of deleveraging through asset sales. A phased-in tightening promotes adjustment to lower leverage via an increase in equity thereby improving resilience and loss absorption capacity. The higher resilience comes at the cost of a portfolio reallocation towards riskier assets. Consistently with models on agency costs and gambling for resurrection, the risk-taking is driven by large and less profitable banks. The net impact on bank probabilities of default is positive albeit statistically insignificant, suggesting that risk-taking may crowd-out solvency.
- JEL Code:
- E51,G21,G28,O52
- 24 July 2020
-
Press releaseRelated
- 24 July 2020
- 24 July 2020
-
Other publicationAnnexes
- 24 July 2020
-
Other publication
Related- 24 July 2020
- 24 July 2020
- 23 July 2020
-
The ECB BlogDetails
- Subtitle:
- Learning the lessons of the past, Europe has moved towards a new model for dealing with crises, writes President Christine Lagarde in The ECB Blog. We have shown that we can act quickly, adapt our institutions and lay the groundwork for forging a new Europe.
- 23 July 2020
- 23 July 2020
-
InterviewDetails
- Subtitle:
- Video interview with Christine Lagarde, President of the ECB, conducted live by David Ignatius on 22 July 2020
- 22 July 2020
-
SpeechDetails
- Subtitle:
- Speech by Luis de Guindos, Vice-President of the ECB, at the 18th annual symposium on “Building the Financial System of the 21st Century: an Agenda for Europe and the United States” organised by the Program on International Financial Systems and Harvard Law School (by videoconference)
- 22 July 2020
-
Statistics Paper Series - Issue No. 37Details
- Abstract:
- The Expert Group on Linking Macro and Micro Data for the household sector (EG-LMM) was established in December 2015 within the European System of Central Banks (ESCB) with the aim of comparing and bridging macro data (i.e. National Accounts/Financial Accounts) and micro data (i.e. the Household Finance and Consumption Survey) on wealth. Furthermore, the Expert Group also focused on developing distributional results for household macro balance sheets, starting with national data from the euro area Member States. The Expert Group assessed the extent to which these two sets of statistics could be compared and was able to link most balance sheet items. Since, following adjustments, the estimates yielded from the micro data were still lower than the macro data, an estimation method was developed to gross up the micro data to be in line with the macro data results. The methodology delivers estimates of the distribution of household wealth that are closely aligned with Financial Accounts aggregates, thereby offering valuable new information for the purposes of macroeconomic analyses based on such Financial Accounts. Further research is needed to examine the robustness of these results and to improve the estimation method taking into account country-specific features and information. The Expert Group has therefore recommended further work be undertaken with a view to compiling experimental distributional results by end-2022.
- JEL Code:
- D31,G51
- 22 July 2020
- 22 July 2020
-
Research Bulletin - Issue No. 73Details
- Abstract:
- We map ECB policy communications onto yield curve changes and study the information flow on monetary policy decision dates. We find that different monetary policy measures exert effects on different segments of the interest rate term structure, with policy rate changes mostly influencing the short-end of the curve and quantitative easing measures acting more on the long-end. The impact of forward guidance policies, on the other hand, reaches its peak at intermediate maturities. A by-product of this work is the publicly available Euro Area Monetary Policy Event-Study Database (EA-MPD), containing intraday asset price changes.
- JEL Code:
- E43,E52,E58,G01,G21
- 21 July 2020
-
Weekly financial statementAnnexes
- 21 July 2020
-
Weekly financial statement - Commentary
- 21 July 2020
-
Working Paper Series - Issue No. 2448Details
- Abstract:
- Inflation volatility is clearly important for structural analysis, forecasting and policy purposes, yet it is often overlooked in the literature. This paper compares inflation volatility among advanced open economies with inflation targeting monetary policy frameworks. The results of the empirical exercise using a panel dataset suggest that, over the last two decades, the volatility of inflation was similar among countries, even when controlling for monetary policy activity and other factors. In particular, there is only a weak and statistically not significant correlation between inflation volatility and country size. Also, point-targeting central banks (in contrast with range-targeters) and commodity exporters are only weakly associated with higher inflation swings. Equivalent conclusions are reached when decomposing inflation volatility in a transitory and a permanent component. I thus argue that small and large advanced open economies are exposed to global fluctuations to a comparable extent. A range of robustness tests confirm that the results are not sensitive to methodological choices and the relationship was not altered by the Great Recession or the low interest rate environment.
- JEL Code:
- E31,E42,E50,F10,F41
- 21 July 2020
-
Working Paper Series - Issue No. 2447Details
- Abstract:
- This paper studies how interest rates impact bank stability in a standard banking model. There are two opposite effects. While higher rates widen banks’ interest margins, they also reduce the value of their long-term assets. First, the paper characterizes conditions under which an effect dominates. Second, it shows that banking crises are triggered by interest rates crossing a tipping point. Quantitatively, I find that the effect on interest margins is dominant. Hence, low rates are the threat to bank stability. Moreover, I estimate the tipping point at 0.32% for the US economy in the decade before the Global Financial Crisis.
- JEL Code:
- E43,E50,G21
- 20 July 2020
-
InterviewDetails
- Subtitle:
- Interview with Isabel Schnabel, Member of the Executive Board of the ECB, conducted by Andrés Stumpf on 16 July and published on 21 July 2020
- 20 July 2020
-
Working Paper Series - Issue No. 2446Details
- Abstract:
- This paper provides novel information on the propagation of the pandemic-induced real shock to firms’ financial conditions. It uses firm-level survey data from end February to early April 2020 for a large sample of euro area SMEs and large firms. Firms’ expectations on the availability of credit lines, bank loans and trade credit deteriorated significantly in the first half of March. Firms mostly expected to be affected if they had previously difficulties in securing finance, had higher indebtedness and, hence, less capacity to deal with a liquidity shock. Conditional on these factors, firm size does not seem to matter, except for trade credit, in which case SMEs had more positive conditional expectations. Together with the overall deterioration of expectations, there seems to have also been a reallocation of opportunities to access finance amidst the crisis. Small firms were more likely to have conditional expectations of improvement in their access to finance.
- JEL Code:
- C83,D22,D84,E65,L25
- 20 July 2020
-
Working Paper Series - Issue No. 2445Details
- Abstract:
- We use monthly data on individual loans from the Italian Credit Register over the period from 1997 to 2019 and show that bank credit expansions in the non-financial private sector are mostly explained by variations in the extensive margin calculated either in credit flows or headcount of new borrowers. We then build on a flow approach to decompose changes in the net creation of borrowers into gross flows across three states: (i) borrowers, (ii) applicants and (iii) others (neither debtors nor applicants). The paper investigates the macroeconomic dimension of these gross flows and documents three key cyclical facts. First, entries in the credit market by new obligors (“inflows”) account for the bulk of volatility in the net creation of borrowers. Second, the volatility of borrower inflows is two times as large as the volatility of obligors exiting from the credit market (“outflows”). Third, borrower inflows are highly pro-cyclical, lead the economic cycle, and their fluctuations are mainly driven by the probability of getting a loan from new banks. We read these results in light of the macrofinance literature on search frictions and on competition with lender-lender informational asymmetries. Overall, our findings support theoretical predictions of these models, but search frictions seem to play a major role in shaping movements along the extensive margin.
- JEL Code:
- E51,E32,E44
- 20 July 2020
-
Balance of payments (monthly)
- 17 July 2020
- 17 July 2020
- 17 July 2020
-
Working Paper Series - Issue No. 2444Details
- Abstract:
- We contrast how monetary policy affects intangible relative to tangible investment. We document that the stock prices of firms with more intangible assets react less to monetary policy shocks, as identified from Fed Funds futures movements around FOMC announcements. Consistent with the stock price results, instrumental variable local projections confirm that the total investment in firms with more intangible assets responds less to monetary policy, and that intangible investment responds less to monetary policy compared to tangible investment. We identify two mechanisms behind these results. First, firms with intangible assets use less collateral, and therefore respond less to the credit channel of monetary policy. Second, intangible assets have higher depreciation rates, so interest rate changes affect their user cost of capital relatively less.
- JEL Code:
- E22,E52,G32
- Network:
- Research Task Force (RTF)
- 17 July 2020
-
Working Paper Series - Issue No. 2443Details
- Abstract:
- Based on ordered Probit models and twenty years of euro area data, we estimate empirical reaction functions for the ECB´s monetary policy and augment them with communication indicators. First, we find that the ECB responded to risks to price stability in line with its primary objective, and that the account of post-meeting communications about risks to price stability and to growth significantly enhances the modelling of its reaction function. Second, we detect that the ECB also responded to the evolution of the federal funds rate, thereby confirming the importance of international interest rate linkages or the global cycle that it reflects. Third, while confirming Gerlach’s (2007) finding on the relevance of M3 growth for explaining future interest rate changes, we show that this result only holds for the period before the global financial crisis.
- JEL Code:
- E43,E52,C22,C25
- 17 July 2020
-
SpeechDetails
- Subtitle:
- Speech by Isabel Schnabel, Member of the Executive Board of the ECB, at a virtual roundtable on “Sustainable Crisis Responses in Europe” organised by the INSPIRE research network, 17 July 2020
- 17 July 2020
-
Press releaseRelated
- 17 July 2020
-
Survey of Professional Forecasters
- 17 July 2020
-
Survey of Professional ForecastersAnnexes
- 17 July 2020
Related- 17 July 2020
- 16 July 2020
-
Monetary policy statementDetails
- Subtitle:
- Christine Lagarde, President of the ECB,Luis de Guindos, Vice-President of the ECB,Frankfurt am Main, 16 July 2020
- 16 July 2020
-
Monetary policy decision
- 14 July 2020
-
Weekly financial statementAnnexes
- 14 July 2020
-
Weekly financial statement - Commentary
- 14 July 2020
-
Press releaseRelated
- 14 July 2020
-
Euro area bank lending survey
- 14 July 2020
-
Euro area bank lending surveyAnnexes
- 14 July 2020
-
Euro area bank lending survey - Annex
Related- 14 July 2020
-
Press release
- 13 July 2020
-
InterviewDetails
- Subtitle:
- Transcript of an interview with Isabel Schnabel, Member of the Executive Board of the ECB, with ARD “plusminus”, conducted by Markus Gürne on 8 July 2020
- 13 July 2020
-
SpeechDetails
- Subtitle:
- Introductory remarks by Fabio Panetta, Member of the Executive Board of the ECB, at a meeting of the Euro Accession Countries Working Group of the Committee on Economic and Monetary Affairs of the European Parliament
- 13 July 2020
- 10 July 2020
- 10 July 2020
- 10 July 2020
- 10 July 2020
- 10 July 2020
-
Euro area securities issues statistics
- 8 July 2020
-
InterviewDetails
- Subtitle:
- Video interview with Christine Lagarde, President of the ECB, conducted by Roula Khalaf on 7 July 2020 and posted on 8 July 2020
- 8 July 2020
-
Weekly financial statementAnnexes
- 8 July 2020
-
Weekly financial statement - Commentary
- 8 July 2020
-
Working Paper Series - Issue No. 2442Details
- Abstract:
- As the role of central banks expanded, demand for public scrutiny of their actions increased. This paper investigates whether parliamentary hearings, the main tool to hold central banks accountable, are fit for this purpose. Using text analysis, it detects the topics and sentiments in parliamentary hearings of the Bank of England, the European Central Bank and the Federal Reserve from 1999 to 2019. It shows that, while central bank objectives play the most relevant role in determining the topic, unemployment is negatively associated with the focus of hearings on price stability. Sentiments are more negative when uncertainty is higher and when inflation is more distant from the central bank’s inflation aim. These findings suggest that parliamentarians use hearings to scrutinise the performance of central banks in line with their objectives and economic developments, but also that uncertainty is associated with a higher perceived risk of under-performance of central banks.
- JEL Code:
- E02,E52,E58
- 8 July 2020
-
Working Paper Series - Issue No. 2441Details
- Abstract:
- To predict the effects of the 2020 U.S. ‘CARES’ act on consumption, we extend a model that matches responses of households to past consumption stimulus packages. The extension allows us to account for two novel features of the coronavirus crisis. First, during the lockdown, many types of spending are undesirable or impossible. Second, some of the jobs that disappear during the lockdown will not reappear when it is lifted. We estimate that, if the lockdown is short-lived, the combination of expanded unemployment insurance benefits and stimulus payments should be sufficient to allow a swift recovery in consumer spending to its pre-crisis levels. If the lockdown lasts longer, an extension of enhanced unemployment benefits will likely be necessary if consumption spending is to recover.
- JEL Code:
- D83,D84,E21,E32
- 7 July 2020
-
InterviewDetails
- Subtitle:
- Interview with Isabel Schnabel, Member of the Executive Board of the ECB, conducted by Mark Beunderman on 1 July 2020
- 7 July 2020
-
SpeechDetails
- Subtitle:
- Introductory remarks by Fabio Panetta, Member of the Executive Board of the ECB, Meeting with Members of the European Parliament
- 6 July 2020
-
Working Paper Series - Issue No. 2440Details
- Abstract:
- We investigate the impact of macroprudential capital requirements on bank lending behaviour across economic sectors, focusing on their potentially heterogenous effects and transmission channel. By employing confidential loan-level data for the euro area over 2015-18, we find that the reaction of banks to structural capital surcharges depends on the level of the required capital buffer and the economic sector of the borrowing counterpart. Although tighter buffer requirements correspond to stronger lending contractions, targeted banks curtail their lending towards credit institutions the most, while leaving loan supply to non-financial corporations almost unchanged. We find that this lending is mitigated when banks resort to central bank funding. These results have important policy implications as they provide evidence on the impact of macroprudential policy frameworks and their interaction with unconventional monetary policies.
- JEL Code:
- E51,E58,E60,G21,G28
- 6 July 2020
-
Working Paper Series - Issue No. 2439Details
- Abstract:
- This paper investigates motives of banks to borrow funds from the ECB through its first two series of targeted longer-term refinancing operations (TLTROs) allotted between September 2014 and March 2017. We quantify that the top-three parameters that determine banks’ take-up decisions are the price of the operation, the amount of eligible collateral of the bank, and the composition of that collateral. In particular, the opportunity for banks to transform their less liquid assets partly into liquid central bank reserves by pledging these assets as collateral with the central bank is a strong motive for take-up and suggests that accepting a broad set of collateral was important for the monetary easing provided by TLTROs. In addition, we find that the conditions attached to TLTRO participation and take-up played an important role in creating broad-based participation across banks of different financial strength and size.
- JEL Code:
- C23,C24,E52,E58,G21
- 3 July 2020
-
Working Paper Series - Issue No. 2438Details
- Abstract:
- We study the effects of technological change on financial intermediation, distinguishing between innovations in information (data collection and processing) and communication (relationships and distribution). Both follow historic trends towards an increased use of hard information and less in-person interaction, which are accelerating rapidly. We point to more recent innovations, such as the combination of data abundance and artificial intelligence, and the rise of digital platforms. We argue that in particular the rise of new communication channels can lead to the vertical and horizontal disintegration of the traditional bank business model. Specialized providers of financial services can chip away activities that do not rely on access to balance sheets, while platforms can interject themselves between banks and customers. We discuss limitations to these challenges, and the resulting policy implications.
- JEL Code:
- G20,G21,E58,O33
- Network:
- Discussion papers
- 3 July 2020
-
Working Paper Series - Issue No. 2437Details
- Abstract:
- This study analyses the choice of government debt managers in the euro area between issuing short‐term or long‐term debt over the period 1992‐2017. Debt managers increased short‐term debt issuance in response to higher interest rate spreads and to rising government debt, notably in vulnerable, high‐debt countries. Thus, lower long-term rates as a result of ECB’s Quantitative Easing (QE) triggered debt managers to focus debt issuance on the long‐term end. Moreover, the usual increase in debt maturity when debt rises ceases to operate when QE is active, possibly because markets perceived it as a backstop to the government bond market. However, limited QE experience calls for caution in interpreting the results.
- JEL Code:
- H63,G12
- 3 July 2020
-
Discussion Paper Series - Issue No. 11Details
- Abstract:
- We study the effects of technological change on financial intermediation, distinguishing between innovations in information (data collection and processing) and communication (relationships and distribution). Both follow historic trends towards an increased use of hard information and less in-person interaction, which are accelerating rapidly. We point to more recent innovations, such as the combination of data abundance and artificial intelligence, and the rise of digital platforms. We argue that in particular the rise of new communication channels can lead to the vertical and horizontal disintegration of the traditional bank business model. Specialized providers of financial services can chip away activities that do not rely on access to balance sheets, while platforms can interject themselves between banks and customers. We discuss limitations to these challenges, and the resulting policy implications.
- JEL Code:
- G20,G21,E58,O33
- 3 July 2020
-
Euro area economic and financial developments by institutional sector (early)
- 3 July 2020
-
MFI interest rate statistics
- 3 July 2020
-
Balance of payments (quarterly)
- 2 July 2020
-
SpeechDetails
- Subtitle:
- Presentation by Isabel Schnabel, Member of the Executive Board of the ECB, at the Berlin Economic Roundtable
- 2 July 2020
- 2 July 2020
-
SpeechDetails
- Subtitle:
- Introductory remarks by Yves Mersch, Member of the Executive Board of the ECB and Vice-Chair of the Supervisory Board of the ECB, at the Salzburg Global webinar
- 2 July 2020
-
Working Paper Series - Issue No. 2436Details
- Abstract:
- We show that financial variables contribute to the forecast of GDP growth during the Great Recession, providing additional insights on both first and higher moments of the GDP growth distribution. If a recession is due to an unforeseen shock (such as the Covid-19 recession), financial variables serve policymakers in providing timely warnings about the severity of the crisis and the macroeconomic risk involved, because downside risks increase as financial stress and corporate spreads become tighter. We use quantile regression and the skewed t-distribution and evaluate the forecasting properties of models using out-of-sample metrics with real-time vintages.
- JEL Code:
- C53,E23,E27,E32,E44
- 2 July 2020
-
Working Paper Series - Issue No. 2435Details
- Abstract:
- The business cycle is alive and well, and real variables respond to it more or less as they always did. Witness the Great Recession. Inflation, in contrast, has gone quiescent. This paper studies the sources of this disconnect using VARs and an estimated DSGE model. It finds that the disconnect is due primarily to the muted reaction of inflation to cost pressures, regardless of how they are measured—a flat aggregate supply curve. A shift in policy towards more forceful inflation stabilization also appears to have played some role by reducing the impact of demand shocks on the real economy. The evidence rules out stories centered around changes in the structure of the labor market or in how we should measure its tightness.
- JEL Code:
- E31,E32,E37,E52
- 1 July 2020
-
InterviewDetails
- Subtitle:
- Interview with Philip R. Lane, Member of the Executive Board of the ECB, conducted by Balázs Korányi, Francesco Canepa and Frank Siebelt
- 1 July 2020
-
Working Paper Series - Issue No. 2434Macroeconomic effects of tariffs shocks: the role of the effective lower bound and the labour marketDetails
- Abstract:
- We simulate a version of the EAGLE, a New Keynesian multi-country model of the world economy, to assess the macroeconomic effects of US tariffs imposed on one country member of the euro area (EA), and the rest of the world (RW). The model is augmented with an endogenous effective lower bound (ELB) on the monetary policy rate of the EA and country-specific labour markets with search-and-matching frictions. Our main results are as follows. First, tariffs produce recessionary effects in each country. Second, if the ELB holds, then the tariff has recessionary effects on the whole EA, even if it is imposed on one EA country and the RW. Third, if the ELB holds and the real wage is flexible in the EA country subject to the tariff, or if there are segmented labour markets with directed search within each country, then the recessionary effects on the whole EA are amplified in the short run. Fourth, if the elasticity of substitution among tradables is low, then the tariff has recessionary effects on the whole EA also when the ELB does not hold.
- JEL Code:
- F16,F41,F42,F45,F47
- 1 July 2020
-
Working Paper Series - Issue No. 2433Details
- Abstract:
- Recent empirical studies have documented two remarkable patterns shown by euro area banks in the aftermath of the Great Recession: (i) their tendency to boost capital ratios by shrinking assets (contraction of loans supply), and (ii) their reluctance to cut back on dividends (fall in retained earnings). First, I provide evidence of a potential link between these two trends. When shocks hit their profits, banks tend to adjust retained earnings to smooth dividends. This generates bank equity and credit supply volatility. Then I develop a DSGE model that incorporates this mechanism to study the transmission and effects of a novel macroprudential policy rule - that I shall call Dividend Prudential Target (DPT) - aimed at complementing existing capital regulation by tackling this issue. Welfare-maximizing DPTs are effective (more than the CCyB) in smoothing the financial and the business cycle (by means of less volatile retained earnings) and induce significant welfare gains associated to a Basel III-type of capital regulation through various channels.
- JEL Code:
- E44,E61,G21,G28,G35
- 1 July 2020
-
SpeechDetails
- Subtitle:
- Keynote speech by Fabio Panetta at a Capital Markets webinar organised by the European Investment Bank and the European Stability Mechanism
Annexes- 1 July 2020
- 1 July 2020
-
InterviewDetails
- Subtitle:
- Interview with Luis de Guindos, Vice-President of the ECB, conducted by Marco Zatterin on 26 June 2020 and published on 1 July 2020
- 30 June 2020
-
Weekly financial statementAnnexes
- 30 June 2020
-
Weekly financial statement - Commentary
- 30 June 2020
-
Working Paper Series - Issue No. 2432Details
- Abstract:
- In this paper, I incorporate a complex network model into a state of the art stochastic general equilibrium framework with an active interbank market. Banks exchange funds one another generating a complex web of interbanking relations. With the tools of network analysis it is possible to study how contagion spreads between banks and what is the probability and size of a cascade (a sequence of defaults) generated by a single initial episode. Those variables are a key component to understand systemic risk and to assess the stability of the banking system. In extreme scenarios, the system may experience a phase transition when the consequences of one single initial shock affect the entire population. I show that the size and probability of a cascade evolve along the business cycle and how they respond to exogenous shocks. Financial shocks have a larger impact on contagion probability than real shocks that, however, are long lasting. Additionally I find that monetary policy faces a trade off between financial stability and macroeconomic stabilization. Government spending shocks, on the contrary, have smaller effects on both.
- JEL Code:
- E44,E32,E52,E58,D85
- 30 June 2020
-
Occasional Paper Series - Issue No. 245Details
- Abstract:
- This paper provides a comprehensive overview of the use of the Eurosystem’s monetary policy instruments and the operational framework, from the first quarter of 2018 to the last quarter of 2019. It reviews the context of Eurosystem market operations; the design and operation of the Eurosystem’s counterparty and collateral frameworks; the fulfilment of minimum reserve requirements; participation in credit operations and recourse to standing facilities; and the conduct of outright asset purchase programmes. The paper also discusses the impact of monetary policy on the Eurosystem's balance sheet, excess liquidity and money market liquidity conditions.
- JEL Code:
- D02,E43,E58,E65,G01
- 30 June 2020
-
Euro money market statistics
- 29 June 2020
- 29 June 2020
- 29 June 2020
- 29 June 2020
-
Working Paper Series - Issue No. 2431Details
- Abstract:
- This paper studies the macroeconomic consequences of the COVID-19 pandemic and makes a first step in adapting the central bank modelling apparatus to the new economic landscape. We augment the ECB-BASE model with the predictive dynamics of the SIR model in order to assess the interplay between epidemiological fundamentals, containment policies and the macroeconomy. Containment policies considerably reduce the share of infected and deceased people, but generate a sharp decline in economic activity. Barring the materialization of amplification risks, the induced recession may remain broadly V-shaped under targeted confinement policies. By comparison, a "laissez-faire" approach to the pandemic emergency can even inflict in some cases higher long-term economic costs. Nevertheless, the depth of the recession and the speed of the recovery (if at all) crucially depend on the magnitude and persistence of the supply-side retrenchment, as well as on the risk of macro-financial feedback loops.
- JEL Code:
- E1,E3,I1
- 29 June 2020
-
Occasional Paper Series - Issue No. 244Details
- Abstract:
- Digitalisation can be viewed as a major supply/technology shock affecting macroeconomic aggregates that are important for monetary policy, such as output, productivity, investment, employment and prices. This paper takes stock of developments in the digital economy and their possible impacts across the euro area and European Union (EU) economies. It also compares how these economies fare relative to other major economies such as that of the United States. The paper concludes that: (i) there is significant country heterogeneity across the EU in terms of the adoption of digital technologies, and most EU countries are falling behind competitors, particularly the United States; (ii) digitalisation is affecting the economy through a number of channels, including productivity, employment, competition and prices; (iii) digitalisation raises productivity and lowers prices, similarly to other supply/technology shocks; (iv) this has implications for monetary policy and its transmission; and (v) structural and other policies may need to be adapted for the euro area and EU countries to fully reap the potential gains from digitalisation, while maintaining inclusiveness.
- JEL Code:
- E22,E24,E31,E32,O33,O52
- 29 June 2020
-
Survey of Monetary Analysts
- 28 June 2020
-
The ECB BlogDetails
- Subtitle:
- Our crisis measures respond to the worst economic crisis in the post-war period, says Executive Board member Isabel Schnabel. They are necessary, suitable and proportionate and benefit all European citizens.
- 27 June 2020
-
SpeechDetails
- Subtitle:
- Speech by Isabel Schnabel, Member of the Executive Board of the ECB, at the Petersberger Sommerdialog, 27 June 2020
Annexes- 27 June 2020
- 26 June 2020
-
Governing Council decisions - Other decisions
- 26 June 2020
-
Working Paper Series - Issue No. 2430Details
- Abstract:
- We identify the spill-over of demand shocks between the world's two largest advanced economies; the US and the euro area. We estimate a Bayesian VAR with sign restrictions, using standard restrictions for the domestic impact of the shock but a novel approach to identify the geographic location of the shocks and rule out common shocks. For the latter, we use the relative performance of small open economies that are neighbors of the US and the euro area, respectively Canada and Sweden, in addition to restricting the relative effects on the US, the euro area and the rest of the world. We find that demand spill-overs of US and euro area demand shocks become smaller on average when imposing relative restrictions, while they become larger in periods which are well-known to be specific to the US (global financial crisis) or the euro area (euro area sovereign debt crisis). Our results are confirmed by running a ‘placebo test’ where we replace the euro area with a small euro area economy, which should not have an independent effect on the US economy due to its small size.
- JEL Code:
- C5,F41,F44
- 26 June 2020
-
Working Paper Series - Issue No. 2429Details
- Abstract:
- We study the composition of bank loan portfolios during the transition of the real sector to a knowledge economy where firms increasingly use intangible capital. Exploiting heterogeneity in bank exposure to the compositional shift from tangible to intangible capital, we show that exposed banks curtail commercial lending and reallocate lending to other assets, such as mortgages. We estimate that the substantial growth in intangible capital since the mid-1980s explains around 30% of the secular decline in the share of commercial lending in banks' loan portfolios. We provide suggestive evidence that this reallocation increased the riskiness of banks' mortgage lending.
- JEL Code:
- E22,E44,G21
- Network:
- Research Task Force (RTF)
- 26 June 2020
-
Monetary developments in the euro areaAnnexes
- 26 June 2020
-
Monetary developments in the euro area
- 25 June 2020
-
SpeechDetails
- Subtitle:
- Remarks by Yves Mersch, Member of the Executive Board of the ECB and Vice-Chair of the Supervisory Board of the ECB, at the Reinventing Bretton Woods Committee Webinar Series
- 25 June 2020
- 25 June 2020
-
SpeechDetails
- Subtitle:
- Informal welcome remarks by Isabel Schnabel, Member of the Executive Board of the ECB, at the Bond Market Contact Group
- 25 June 2020
-
Monetary policy account
- 25 June 2020
-
Working Paper Series - Issue No. 2428Details
- Abstract:
- In this paper we use a medium-scale DSGE model to quantitatively assess the macroeconomic stabilisation properties of a supranational unemployment insurance scheme. The model is calibrated to the euro area's core and periphery and features a rich fiscal sector, sovereign risk premia and labour market frictions. Adopting both simple policy rules and optimal policies, our simulations point to enhanced business cycle synchronisation and interregional consumption smoothing. Depending on the exact specification, the results suggest a reduction in the volatility of consumption by up to 49% at the region-level, while the cross-regional correlation of unemployment and inflation increases by up to 52% and 27%, respectively, compared to the decentralised setting. The higher degree of inter-regional risk-sharing comes at the cost of sizable fiscal transfers. Limiting such transfers via claw-back mechanisms implies a much weaker degree of stabilisation across countries.
- JEL Code:
- F45,E63,E62,E24
- 25 June 2020
-
Working Paper Series - Issue No. 2427Details
- Abstract:
- We document three new empirical facts: (i) monetary policy shocks increase the markup dispersion across firms, (ii) they increase the relative markup of firms with stickier prices, and (iii) firms with stickier prices have higher markups. This is consistent with a New Keynesian model in which price rigidity is heterogeneous across firms. In the model, firms with more rigid prices optimally set higher markups and their markups increase by more after monetary policy shocks. The consequent increase in markup dispersion explains a negative aggregate TFP response. In a calibrated model, monetary policy shocks generate substantial fluctuations in aggregate productivity.
- JEL Code:
- E30,E50
- Network:
- ECB Lamfalussy Fellowship Programme
- 25 June 2020
-
Press releaseAnnexes
- 5 December 2022
- 24 June 2020
-
Working Paper Series - Issue No. 2426Details
- Abstract:
- This paper develops a simple, consistent methodology for generating empirically realistic forward guidance simulations using existing macroeconomic models by modifying expectations about policy announcements. The main advantage of our method lies in the exact preservation of all other shock transmissions. We describe four scenarios regarding how agents incorporate information about future interest rate announcements: “inattention”, “credibility”, “finite planning horizon”, and “learning”. The methodology consists of describing a single loading matrix that augments the equilibrium decision rules and can be applied to any standard DSGE, including large-scale policy-institution models. Finally, we provide conditions under which the forward guidance puzzle is resolved.
- JEL Code:
- C63,E32,E52
- 24 June 2020
-
Working Paper Series - Issue No. 2425Details
- Abstract:
- This paper studies the implications of perceived default risk for aggregate output and productivity. Using a model of credit contracts with moral hazard, we show that a firm’s probability of default is a sufficient statistic for capital allocation. The theoretical framework suggests an aggregate measure of the impact of credit market frictions based on firm-level probabilities of default which can be applied using data on firm-level employment and default risk. We obtain direct estimates of firm-level default probabilities using Standard and Poor’s PD Model to capture the expectations that lenders were forming based on their historical information sets. We implement the method on the UK, an economy that was strongly exposed to the global financial crisis and where we can match default probabilities to administrative data on the population of 1.5 million firms per year. As expected, we find a strong correlation between default risk and a firm’s future performance. We estimate that credit frictions (i) cause an output loss of around 28% per year on average; (ii) are much larger for firms with under 250 employees and (iii) that losses are overwhelmingly due to a lower overall capital stock rather than a misallocation of credit across firms with heterogeneous productivity. Further, we find that these losses accounted for over half of the productivity fall between 2008 and 2009, and persisted for smaller (although not larger) firms.
- JEL Code:
- D24,E32,L11,O47
- Network:
- ECB Lamfalussy Fellowship Programme
- 24 June 2020
-
SpeechDetails
- Subtitle:
- Speech by Philip R. Lane, Member of the Executive Board of the ECB, at the Financial Center Breakfast Webinar organised by Frankfurt Main Finance
- 23 June 2020
-
Weekly financial statementAnnexes
- 23 June 2020
-
Weekly financial statement - Commentary
- 23 June 2020
-
Working Paper Series - Issue No. 2424Details
- Abstract:
- Forward guidance operates via the expectations formation process of the agents in the economy. In standard quantitative macroeconomic models, the expectations are unobserved state variables and little scrutiny is devoted to analysing the dynamic behaviour of these expectations. We show that the introduction of survey and financial market-based forecasts in the estimation of the model disciplines the expectations formation process in DSGE models. When the model-implied expectations are matched to observed expectations, the additional information of the forecasts restrains the agents’ expectations formation. We argue that the reduced volatility of the agents’ expectations dampens the model reactions to forward guidance shocks and improves the out-of-sample forecast accuracy of the model. Furthermore, we evaluate the case for introducing a discount factor as a reduced form proxy for a variety of microfounded approaches, proposed to mitigate the forward guidance puzzle. Once data on expectations is considered, the empirical support to introduce a discount factor dissipates.
- JEL Code:
- C13,C52,E3,E47,E52
- 23 June 2020
-
Working Paper Series - Issue No. 2423Details
- Abstract:
- The purpose of this paper is to study the compensation for inflation risks priced in sovereign bond yields. And we do so by modelling the time-varying dynamics of asset returns and inflation, and then estimating the cost of hedging inflation risks from the perspective of a well diversified portfolio. This allows to disentangle the time-varying compensation for expected and unexpected inflation shocks embedded in sovereign bond yields; and provides estimates of the real risk-free rate. We show that nominal sovereign bond yields for Germany, France, Japan and the United States, reflect, over the more recent years, a low real risk-free rate, as well as low levels of compensation for both expected and unexpected inflation. The simultaneous occurrence of these low contributions is novel, and not encountered previously in our sample. We also find that inflation risks are not necessarily reduced with the inclusion of real estate assets in the minimum variance portfolio. Our analysis also prompts us to suggest that the financial advantage of issuing inflation-linked sovereign debt, and namely saving on the embedded inflation risk premium of issuing nominal debt, appears to be eroded by the liquidity premium charged by investors for holding the less attractive inflation-linked debt asset.
- JEL Code:
- C32,E31,G11,G12
- 22 June 2020
-
SpeechDetails
- Subtitle:
- Presentation by Philip R. Lane, Member of the Executive Board of the ECB, at the Princeton BCF Covid-19 Webinar Series
- 22 June 2020
-
The ECB BlogDetails
- Subtitle:
- Evidence shows that the policies adopted by the ECB in mid-March, including the pandemic emergency purchase programme (PEPP) and other liquidity-easing measures, have contributed to stabilising markets, writes Chief Economist Philip R. Lane.
- 22 June 2020
-
SpeechDetails
- Subtitle:
- Speech by Luis de Guindos, Vice-President of the ECB, at the Frankfurt Finance Summit
- 22 June 2020
-
Occasional Paper Series - Issue No. 243Details
- Abstract:
- This Occasional Paper reviews how climate change and policies to address it may affect the macro economy in ways that are relevant for central banks’ monetary policy assessment of the inflation outlook. To this end, the paper focuses on the potential channels through which climate change and the policy and technological responses to climate change could have an impact on the real economy. Overall, the existing literature suggests a likelihood that climate change will have demand-side implications, but will also cause a negative supply shock in the decades to come and may even have the potential to lead to widespread disruption to the economic and financial system. We may already be observing a rise in the costs resulting from an increased incidence of extreme weather conditions. The direct effects stemming from climate change are likely to increase gradually over time as global temperatures increase. Nevertheless, it is extremely difficult to obtain reliable estimates of the overall macroeconomic impact of climate change, which will also depend on the extent to which it can be brought under control through mitigation policies requiring major structural changes to the economy. In order to implement such policies political economy obstacles will need to be overcome and measures will need to be put in place that address underlying market failures. They could involve significant fiscal implications, with an increased price of carbon contributing to higher overall prices. At the same time, these measures could also foster innovation, generate fiscal revenues and dampen inflationary pressures as energy efficiency increases and the price of renewable energy falls.
- JEL Code:
- Q43,Q54,Q55,Q58
- 22 June 2020
-
Occasional Paper Series - Issue No. 242Details
- Abstract:
- Due to the international dimension of the financial sector within the EU and beyond, domestically oriented macroprudential policies have the potential to create material cross-border spillover effects. This occasional paper provides a detailed overview of the academic and empirical literature on cross-border effects of macroprudential policies. It also summarises a stocktaking exercise, conducted by a task force of the ESCB’s Financial Stability Committee (FSC), on existing national approaches within the EU for assessing and monitoring such cross-border spillover effects. The paper accompanies an FSC report presenting a framework to be used by macroprudential authorities when assessing cross-border spillover effects induced by enacted or planned policy measures.
- JEL Code:
- E42,E58,F36,G21
- 22 June 2020
-
InterviewDetails
- Subtitle:
- Interview with Luis de Guindos, Vice-President of the ECB, conducted by Tim Bartz and Stefan Kaiser on 15 June and published on 22 June 2020
- 19 June 2020
- 19 June 2020
- 19 June 2020
- 19 June 2020
- 19 June 2020
- 19 June 2020
-
Balance of payments (monthly)
- 19 June 2020
-
Research Bulletin - Issue No. 72Details
- Abstract:
- The Global Weakness Index (GWI) is a real-time measure of how weak the global economy is. We use this index to assess on the spot how the repercussions of the coronavirus (COVID-19) crisis are playing out. After the release of certain soft indicators on March 2, 2020 the GWI increased sharply – much faster than in the 2008 crisis. And at the time of writing it remains at a record high.
- JEL Code:
- E32,E37,C22
- 18 June 2020
-
Economic Bulletin
- 18 June 2020
-
Economic Bulletin - BoxEconomic Bulletin Issue 4, 2020Details
- Abstract:
- This box examines fiscal measures taken at the level of euro area countries and the EU in response to the coronavirus (COVID-19) crisis.
- JEL Code:
- E62,H6
- 18 June 2020
-
Economic Bulletin - BoxEconomic Bulletin Issue 4, 2020Details
- Abstract:
- This box examines regional developments in labour input within the euro area since the peak in economic activity before the global financial crisis (GFC). It reveals that the increase in total hours worked during the recovery that followed the GFC was greater than the decline during the recession only for regions at the top of the GDP per capita distribution. Overall, the evolution of total hours worked in the euro area between 2007 and 2018 was quite heterogeneous across regions, with hours worked being more insulated from the fall in GDP in richer regions during the recession period and poorer regions not converging with their richer counterparts during the recovery that followed. The smaller decline in total hours worked in the richer regions during the downturn and the similar growth rates observed during the recovery are the main sources of the regional heterogeneity in the time pattern of total hours worked, and can be attributed to changes in the employment rate, to the decline in average hours worked during the recession period, and to the stability of regional differences in population growth during both periods, with the latter factor being consistent with labour migrating from poorer to richer regions.
- JEL Code:
- E24
- 18 June 2020
-
Economic Bulletin - BoxLiquidity conditions and monetary policy operations in the period from 29 January 2020 to 5 May 2020Economic Bulletin Issue 4, 2020Details
- Abstract:
- This box describes the ECB’s monetary policy operations during the first two reserve maintenance periods of 2020, which ran from 29 January to 5 May 2020.
- JEL Code:
- E40,E52,E58
- 17 June 2020
-
Economic Bulletin - BoxEconomic Bulletin Issue 4, 2020Details
- Abstract:
- The lockdown measures adopted to contain the coronavirus (COVID-19) pandemic and confidence effects are having a significant impact on euro area trade in services. Among several heterogeneous sectors, those involving physical contact are severely affected. The travel sector has been particularly disrupted owing to travel restrictions and the closure of tourist sites. With regard to passenger transportation, the airline industry in particular faces sustained headwinds. Some euro area countries which depend on travel and tourism face particularly adverse economic consequences.
- JEL Code:
- F14,L83
- 17 June 2020
-
Economic Bulletin - BoxEconomic Bulletin Issue 4, 2020Details
- Abstract:
- This box reviews recent developments in short-time work and temporary lay-off schemes in the five largest euro area countries. It then calculates wage replacement rates and estimates take-up rates. Combining wage replacement rates with the estimated number of participants makes it possible to calculate the impact of short-time work on household disposable income. The box concludes that short-time work and temporary lay-off measures are significantly buffering the impact of COVID-19 on households’ disposable income.
- JEL Code:
- E24,E65
- 17 June 2020
-
Economic Bulletin - BoxEconomic Bulletin Issue 4, 2020Details
- Abstract:
- This box presents evidence on the impact of the coronavirus (COVID-19) crisis among small and medium-sized enterprises (SMEs) based on the results of the 22nd round of the Survey on the Access to Finance of Enterprises (SAFE).
- JEL Code:
- D22,E58,G32
- 17 June 2020
-
Economic Bulletin - BoxEconomic Bulletin Issue 4, 2020Details
- Abstract:
- The spread of the coronavirus (COVID-19) pandemic across the globe has led to significant declines in major equity indices and a spike in volatility to values above those recorded in the aftermath of the default of Lehman Brothers in September 2008. In line with the sharp rise in current risks, investors also raised their expectations of future risks, as shown by a widening of the risk-neutral density of future euro area equity returns. The increase in perceived risks accompanied a noticeable rise in investors’ risk aversion to negative tail events. More recently, and following the announcement of significant monetary and fiscal policy stimulus, the estimated tail risk aversion has been declining, while expected risks remain elevated.
- JEL Code:
- G10,G12,G13
- 16 June 2020
-
Weekly financial statementAnnexes
- 16 June 2020
-
Weekly financial statement - Commentary
- 16 June 2020
-
Working Paper Series - Issue No. 2422Details
- Abstract:
- How do near-zero interest rates affect optimal bank capital regulation and risk-taking? I study this question in a dynamic model, in which forward-looking banks compete imperfectly for deposit funding, but households do not accept negative deposit rates. When deposit rates are constrained by the zero lower bound (ZLB), tight capital requirements disproportionately hurt franchise values and become less effective in curbing excessive risk-taking. As a result, optimal dynamic capital requirements vary with the level of interest rates if the ZLB binds occasionally. Higher inflation and unconventional monetary policy can alleviate the problem, though their overall welfare effects are ambiguous.
- JEL Code:
- G21,G28,E44,E58
- Network:
- ECB Lamfalussy Fellowship Programme
- 16 June 2020
- 16 June 2020
- 16 June 2020
-
Economic Bulletin - ArticleEconomic Bulletin Issue 4, 2020Details
- Abstract:
- Using information derived from the survey on the access to finance of enterprises (SAFE), this article provides an overview of the changes in the financing conditions experienced by euro area companies over the last ten years. The focus is on non-financial small and medium-sized enterprises (SMEs). Following the Global Financial Crisis and during the subsequent euro area sovereign debt crisis, access to external finance for these firms was severely impaired. This was followed by a steady improvement in financial conditions, particularly due to support from the accommodative monetary policy measures introduced since 2012. Despite a gradual improvement since the mid-2010s, challenges for SMEs’ access to finance remained, for example in terms of funding diversification, even before the coronavirus (COVID-19) crisis started at the end of 2019. The outbreak of the recent pandemic raised some new, severe and immediate challenges for SMEs in terms of their access to financing. An accompanying box in this issue of the Economic Bulletin summarises the results of the latest SAFE survey, which took place in March and April 2020, in the midst of the coronavirus crisis.
- JEL Code:
- D22,E58,G32
- 16 June 2020
-
InterviewDetails
- Subtitle:
- Interview with Fabio Panetta, Member of the Executive Board of the ECB, conducted by Eric Albert, and published on 16 June 2020
- 15 June 2020
-
Working Paper Series - Issue No. 2421Details
- Abstract:
- We study state dependence in the impact of monetary policy shocks over the leverage cycle for a panel of 10 euro area countries. We use a Bayesian Threshold Panel SVAR with regime classifications based on credit and house prices cycles. We find that monetary policy shocks trigger a smaller response of GDP, but a larger response of inflation during low states of the cycle. The shift in the inflation-output trade-off may result from higher macro-economic uncertainty in low leverage states. For an alternative regime classification based on turning points we find larger effects on GDP during contractions.
- JEL Code:
- C32,E32,E44
- Network:
- Research Task Force (RTF)
- 15 June 2020
-
Working Paper Series - Issue No. 2420Details
- Abstract:
- We propose a new methodology to recover firm-time varying financial constraints from firms’ production behavior. We model financial constraints as the profitability that firms forgo when budget constraints on production inputs bind, impeding them from using the optimal level of inputs and technology. We estimate and validate our measure using unique data combining firms’ balance sheets with survey information on self-reported financial constraints, like loan rejections. In contrast to three popular indices of financial constraints, our measure recovers financial constraints beyond observable firm characteristics, recovers cross-sectional and time-varying stylized facts of financial constraints, and is applicable to both public and private firms.
- JEL Code:
- E44,G00,G30,G32
- 15 June 2020
-
Economic Bulletin - ArticleEconomic Bulletin Issue 4, 2020Details
- Abstract:
- Building on the literature on trust in institutions, this article looks at the state, evolution and sociodemographic breakdown of citizens’ trust in the ECB and support for the euro. Drawing on a novel typology of attitudes towards Economic and Monetary Union (EMU) and using microdata from Eurobarometer surveys since the introduction of the single currency, the analysis tracks the prevalence of supporters and sceptics of EMU over time and across euro area countries. It further explores the sociodemographic characteristics, economic perceptions and, more broadly, European sentiments within these groups. In this way, it provides insights into the factors shaping citizens’ attitudes towards the ECB, the euro and EMU, and helps identify possible avenues for enhancing trust. The analysis indicates that popular support for EMU – in particular, trust in the ECB – hinges to a large extent on citizens’ perceptions of their personal situation and the overall economic context, as well as their broader attitudes towards the European Union, while other sociodemographic indicators seem to be less relevant.
- JEL Code:
- E58,G53,R10,Z13
- 14 June 2020
-
InterviewDetails
- Subtitle:
- Interview with Luis de Guindos, Vice-President of the ECB, conducted by María Jesús Pérez on 9 June 2020 and published on 14 June 2020
- 13 June 2020
-
SpeechDetails
- Subtitle:
- Remarks by Christine Lagarde, President of the ECB, via videoconference at the inaugural session of the Italian National Consultation
- 12 June 2020
-
The ECB BlogDetails
- Subtitle:
- The goals of boosting the euro’s global standing and sharing its advantages more evenly are one and the same, writes Executive Board member Fabio Panetta. Through the right mix of European fiscal and monetary policy, we can build a better functioning Monetary Union that achieves both of these goals.
- 12 June 2020
-
Working Paper Series - Issue No. 2419Details
- Abstract:
- This paper aims at investigating the relationship between firms’ profit efficiency, access to finance and innovation activities. We enrich our understanding on firms’ performance by adopting the stochastic frontier approach (SFA), which allows us to estimate profit functions and to obtain efficiency scores for a large sample of European firms. We pioneer the use of a novel dataset that merges survey-based data derived from the ECB Survey on access to finance for enterprises (SAFE) with balance sheet information. Our evidence documents that credit constrained firms display an incentive to improve their efficiency in order to increase profitability. Among firms that have embarked in product innovation, those in the industry and high-tech sectors see their effort translated in higher profit efficiency. From a policy perspective, our results could help to better understand the link between innovation, financial constraints and efficiency, which goes beyond the idea that easier access to finance is the panacea to get higher profit efficiency.
- JEL Code:
- D22,D24,L23,O31,C33
- 12 June 2020
-
Working Paper Series - Issue No. 2418Details
- Abstract:
- We quantify the size of fiscal multipliers under financial fragmentation risk and demonstrate how non-standard monetary policy can support the macroeconomic transmission of fiscal interventions. We employ a DSGE model with financial frictions whereby the interplay of corporate, banks and sovereign solvency risk affect the transmission of fiscal policy. The output multiplier of fiscal expansion is found to be significantly dampened by tighter financial conditions in case households are less certain about implicit and explicit state-guarantees for the banking system, or banks are weakly capitalized and highly exposed to the government sector. In this context, we show that central bank asset purchases or liquidity operations designed to ensure favourable bank funding conditions can restore fiscal multipliers.
- JEL Code:
- E44,E52,E62
- 12 June 2020
-
Euro area securities issues statistics
- 11 June 2020
-
InterviewDetails
- Subtitle:
- Interview with Philip R. Lane, Member of the Executive Board of the ECB, conducted by Isabella Bufacchi on 8 June
- 10 June 2020
-
SpeechDetails
- Subtitle:
- Remarks by Luis de Guindos, Vice-President of the ECB at the Institute of International and European Affairs, Dublin, (by video conference)
- 10 June 2020
- 10 June 2020
- 10 June 2020
-
SpeechDetails
- Subtitle:
- Remarks by Isabel Schnabel, Member of the Executive Board of the ECB, at an online seminar hosted by the Florence School of Banking & Finance
Annexes- 10 June 2020
-
Speech
- 10 June 2020
-
Convergence Report - Issue No. 2020
- 10 June 2020
- 9 June 2020
-
InterviewDetails
- Subtitle:
- Interview on Twitter with Isabel Schnabel, Member of the Executive Board of the ECB, conducted and published on 9 June 2020
- 9 June 2020
-
Weekly financial statementAnnexes
- 9 June 2020
-
Weekly financial statement - Commentary
- 9 June 2020
-
The international role of the euro - BoxThe international role of the euro 2020Details
- 9 June 2020
-
Press releaseRelated
- 9 June 2020
-
The international role of the euro
- 9 June 2020
-
The international role of the euroAnnexes
- 9 June 2020
Related- 9 June 2020
-
Press release
- 8 June 2020
-
SpeechDetails
- Subtitle:
- Introductory statement by Christine Lagarde, President of the ECB, at the ECON committee of the European Parliament (by videoconference)
Annexes- 8 June 2020
-
Speech
- 8 June 2020
-
Press releaseAnnexes
- 8 June 2020
- 8 June 2020
- 6 June 2020
-
InterviewDetails
- Subtitle:
- Intervista con Fabio Panetta, membro del Comitato Esecutivo della BCE, condotta da Leonardo Panetta il 5 giugno 2020
- 5 June 2020
-
InterviewDetails
- Subtitle:
- Interview with Fabio Panetta, Member of the Executive Board of the ECB, conducted by Giorgio Zanchini on 5 June 2020
- 5 June 2020
- 5 June 2020
-
InterviewDetails
- Subtitle:
- Interview with Christine Lagarde, President of the ECB, conducted by Léa Salamé and Thomas Sotto on 4 June 2020
- 5 June 2020
- 5 June 2020
-
The ECB BlogDetails
- Subtitle:
- Two main factors called for further policy action, writes Chief Economist Philip R. Lane. First, the pandemic-related negative shock to inflation poses a threat to medium-term price stability. Second, while conditions in financial markets have stabilised substantially, the situation remains fragile.
- 5 June 2020
-
MFI interest rate statistics
- 4 June 2020
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Macroeconomic projections for the euro areaAnnexes
- 4 June 2020
-
Macroeconomic projections for the euro area
- 18 June 2020
- 4 June 2020
-
Monetary policy statementDetails
- Subtitle:
- Christine Lagarde, President of the ECB,Luis de Guindos, Vice-President of the ECB,Frankfurt am Main, 4 June 2020
- 4 June 2020
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Monetary policy decision
- 3 June 2020
-
T2S financial statement
- 3 June 2020
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T2S Annual Report
- 3 June 2020
-
Euro area insurance corporations statistics
- 2 June 2020
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Weekly financial statementAnnexes
- 2 June 2020
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Weekly financial statement - Commentary
- 29 May 2020
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Monetary developments in the euro areaAnnexes
- 29 May 2020
-
Monetary developments in the euro area
- 27 May 2020
-
InterviewDetails
- Subtitle:
- Interview with Isabel Schnabel, Member of the Executive Board of the ECB, conducted by Karen Horn
- 27 May 2020
-
Working Paper Series - Issue No. 2417Details
- Abstract:
- This paper provides a dataset on the currency composition of the international investment position for a group of 50 countries for the period 1990-2017. It improves available data based on estimates by incorporating actual data reported by statistical authorities and refining estimation methods. The paper illustrates current and new uses of these data, with particular focus on the evolution of currency exposures of cross-border positions.
- JEL Code:
- F20,F31,F41
- 27 May 2020
-
Research Bulletin - Issue No. 71Details
- Abstract:
- During crises, the number of loans that cannot be paid back increases. What are the lessons from past crises for non-performing loan resolution after COVID-19? In this article we use a new database covering non-performing loans (NPLs) in 88 banking crises since 1990 to find out. The data show that dealing with NPLs is critical to economic recovery. Compared with the 2008 crisis, some factors are conducive to NPL resolution this time: banks have higher capital, the forward-looking IFRS 9 accounting standards can help NPL recognition, and the COVID-19 crisis was not preceded by a credit boom. However, other factors could make NPL resolution more challenging: government debt is substantially higher, banks are less profitable, and corporate balance sheets are often weak.
- JEL Code:
- E52,E61,E63
- 27 May 2020
-
InterviewDetails
- Subtitle:
- Interview with Isabel Schnabel, Member of the Executive Board of the ECB, conducted by Martin Arnold on 25 May and published on 27 May 2020
- 26 May 2020
-
Press releaseRelated
- 26 May 2020
-
Financial Stability Review
- 26 May 2020
-
Weekly financial statementAnnexes
- 26 May 2020
-
Weekly financial statement - Commentary
- 26 May 2020
-
Financial Stability Review - ArticleFinancial Stability Review Issue 1, 2020Details
- Abstract:
- Stricter margining requirements for derivative positions have increased the demand for collateral by market participants in recent years. At the same time, euro area investment funds which use derivatives extensively have been reducing their liquid asset holdings. Using transaction-by-transaction derivatives data, this special feature assesses whether the current levels of funds’ holdings of cash and other highly liquid assets would be adequate to meet funds’ liquidity needs to cover variation margin calls on derivatives during stressed market periods, once the derivative portfolios become fully collateralised. The evidence so far indicates that euro area funds were able to meet the fivefold increase in variation margin during the height of the coronavirus-related market stress. But some of them were likely to have done so by engaging in repo transactions, selling assets and drawing on credit lines, thus amplifying the recent market dynamics.
- 26 May 2020
-
Financial Stability Review - ArticleFinancial Stability Review Issue 1, 2020Details
- Abstract:
- It is often maintained that the recent real estate booms in many euro area countries have been accompanied by a loosening in lending standards. However, data for a thorough cross-country assessment of lending standards have been missing. This special feature uses a novel euro area dataset from a dedicated data collection covering significant institutions supervised by ECB Banking Supervision to analyse trends in real estate lending standards and derive implications for financial stability. First, lending standards for residential real estate loans in the euro area, in particular loan-to-income ratios, eased between 2016 and 2018. Given the significant deterioration in the euro area economic outlook since the coronavirus outbreak, this vulnerability seems of particular relevance. Second, lending standards appear to be looser in countries that saw stronger real estate expansions, suggesting that real estate vulnerabilities may have been growing in some euro area countries. Third, lending standards deteriorated less in countries with borrower-based macroprudential policies in place, highlighting the importance of early macroprudential policy action to help prevent the build-up of real estate vulnerabilities.
- 26 May 2020
-
Financial Stability ReviewAnnexes
- 26 May 2020
Related- 26 May 2020
-
Press release
- 26 May 2020
-
Working Paper Series - Issue No. 2416Details
- Abstract:
- After a first phasing out of the ECB’s net asset purchases at end-2018, the question of how a future tightening of the ECB’s monetary policy may affect countries located in the vicinity of the euro area has gained prominence, but has been left largely unanswered so far. Our paper aims to close this gap for the CESEE region by employing shock-specific conditional forecasts, a methodology that has been little exploited in this context. Besides demonstrating the usefulness of our framework, we obtain three key findings characterising the spillovers of ECB monetary policy to CESEE economies: first, a euro area monetary tightening does trigger sizeable spillovers to the CESEE region. Second, we show that in the context of a demand shock-induced monetary tightening, which is more realistic than the usual approach taken in the literature, CESEE countries’ output and prices actually respond positively. Third, spillovers on output and prices in CESEE countries are heterogeneous, and depend on the trajectory of euro area tightening.
- JEL Code:
- C11,C32,E52,F42
- 26 May 2020
-
Working Paper Series - Issue No. 2415Details
- Abstract:
- I analyze the impact of raising capital requirements on the quantity, composition, and riskiness of aggregate investment in a model in which firms borrow from both bank and non-bank lenders. The bank funds loans with insured deposits and costly equity, monitors borrowers, and must maintain a minimum capital to asset ratio. Non-banks have deep pockets and competitively price loans. A tight capital requirement on the bank reduces risk-shifting and decreases bank leverage, reducing the risk of costly bank failure. In response, though, the bank can change both price and non-price contract terms. This may induce firms to substitute out of bank finance, leading to a theoretically ambiguous effect on the profile of aggregate investment. Quantitatively, I find that the bank's incentive to insure itself against issuing costly equity and competition from the non-bank sector mutes the long run impact of raising capital requirements. Increasing the capital requirement from 8% to 26% eliminates bank failures with effectively no change in the quantity or riskiness of aggregate investment.
- JEL Code:
- G2,E5,E6,E32,E44
- Network:
- ECB Lamfalussy Fellowship Programme
- 26 May 2020
-
Other publicationDetails
- Subtitle:
- for statistics on holdings of securities by reporting banking groups (SHSG)
- 26 May 2020
-
Euro money market statistics
- 25 May 2020
-
Working Paper Series - Issue No. 2414Details
- Abstract:
- We examine optimal capital requirements in a quantitative general equilibrium model with banks exposed to non-diversifiable borrower default risk. Contrary to standard models of bank default risk, our framework captures the limited upside but significant downside risk of loan portfolio returns (Nagel and Purnanandam, 2020). This helps to reproduce the frequency and severity of twin defaults: simultaneously high firm and bank failures. Hence, the optimal bank capital requirement, which trades off a lower frequency of twin defaults against restricting credit provision, is 5pp higher than under standard default risk models which underestimate the impact of borrower default on bank solvency.
- JEL Code:
- G01,G28,E44
- 22 May 2020
-
SpeechDetails
- Subtitle:
- Speech by Philip R. Lane, Member of the Executive Board of the ECB, at the Inflation: Drivers and Dynamics 2020 Online Conference, Federal Reserve Bank of Cleveland/European Central Bank, 22 May 2020
- 22 May 2020
-
Governing Council decisions - Other decisions
- 22 May 2020
-
Monetary policy account
- 22 May 2020
-
Euro area financial vehicle corporation statistics
- 22 May 2020
-
Euro area investment fund statistics
- 20 May 2020
-
TARGET Annual Report
- 20 May 2020
-
Balance of payments (monthly)
- 19 May 2020
-
SpeechDetails
- Subtitle:
- Remarks by Philip R. Lane, Member of the Executive Board of the ECB, at the Institute for Monetary and Financial Stability Policy Webinar, 19 May 2020
- 19 May 2020
-
Weekly financial statementAnnexes
- 19 May 2020
-
Weekly financial statement - Commentary
- 19 May 2020
-
Working Paper Series - Issue No. 2413Details
- Abstract:
- Does leverage drive investor flows in bond mutual funds? Leverage can increase fund returns in good times, but it can also magnify investors’ losses and their response to bad performance. We study bond fund flows to provide new evidence for the link between mutual fund leverage and financial fragility. We find that outflows are greater in leveraged funds during stressed periods and after bad performance, compared with unleveraged funds. We provide supporting evidence that leverage exacerbates the negative externality in investors' redemption decisions. In this regard, we find that fund managers in leveraged funds react more procyclically to net outflows compared with fund managers in unleveraged funds. Such procyclical security sales in leveraged funds may increase investors’ first-mover advantages and their response to bad performance. These findings suggest that leverage amplifies fragility in the bond mutual fund sector.
- JEL Code:
- G01,G20,G23
- 19 May 2020
-
Working Paper Series - Issue No. 2412Details
- Abstract:
- This paper tests whether fluctuations in investors' attention affect stock return comovement with national and global markets, and which stocks are most affected. We measure fluctuations in investor attention using 59 high-profile soccer matches played during stock market trading hours at the three editions of the FIFA World Cup between 2010 and 2018. Using intraday data for more than 750 firms in 19 countries, we find that distracted investors shift attention away from firm-specific and from global news. When movements in global stock markets are large, the pricing of global news reverts back to normal, but firm-specific news keep being priced less, leading to increased comovement of stock returns with the national stock market. This increase is economically large, and particularly strong for those stocks that typically comove little with the national market, thereby leading to a convergence in betas across stocks.
- JEL Code:
- G12,G15,G41
- 19 May 2020
-
Survey on credit terms and conditions in euro-denominated securities financing and OTC derivatives marketsAnnexes
- 19 May 2020
-
Other publication
- 19 May 2020
-
Other publication
- 19 May 2020
-
Press releaseRelated
- 18 May 2020
-
InterviewDetails
- Subtitle:
- Interview with Christine Lagarde, President of the ECB, conducted by Dominique Seux, Federico Fubini, Thomas Hanke and Carlos Segovia, published on 18 May 2020
- 18 May 2020
-
Survey of Monetary Analysts
- 18 May 2020
-
InterviewDetails
- Subtitle:
- Interview with Philip R. Lane, Member of the Executive Board of the ECB, conducted by Luis Doncel on 11 May 2020 and published on 18 May 2020
- 15 May 2020
- 15 May 2020
- 15 May 2020
- 15 May 2020
- 15 May 2020
- 15 May 2020
-
Working Paper Series - Issue No. 2411Details
- Abstract:
- We contribute to the empirical literature on the impact of non-performing loan (NPL) ratios on aggregate banking sector variables and the macroeconomy by estimating a panel Bayesian VAR model for twelve euro area countries. The model is estimated assuming a hierarchical prior that allows for country-specific coefficients. The VAR includes a large set of variables and is identified via Choleski factorisation. We estimate the impact of exogenous shocks to the change in NPL ratios across countries. The main findings of the paper are as follows: i ) An impulse response analysis shows that an exogenous increase in the change in NPL ratios tends to depress bank lending volumes, widens bank lending spreads and leads to a fall in real GDP growth and residential real estate prices; ii ) A forecast error variance decomposition shows that shocks to the change in NPL ratios explain a relatively large share of the variance of the variables in the VAR, particularly for countries that experienced a large increase in NPL ratios during the recent crises; and iii ) A three-year structural out-of-sample scenario analysis provides quantitative evidence that reducing banks' NPL ratios can produce significant benefits in euro area countries in terms of improved macroeconomic and financial conditions.
- JEL Code:
- G21,C32,C11
- 15 May 2020
-
Working Paper Series - Issue No. 2410Details
- Abstract:
- International trade in manufacturing goods has risen strongly over the past decades, contributing to the expansion of global value chains (GVCs). This paper studies how two factors contributed to this rise since 1970: (i) declining “border effects” that are arguably related to the ICT revolution that started around 1985, and (ii) the implementation of Free Trade Agreements that have gotten deeper over time. We take advantage of the identification of the time dimension in a panel setting to capture the emergence of GVCs by disentangling domestic and international trade in final goods and intermediate inputs. According to our results, diminished border effects account for the bulk of the increase in international trade in manufactured goods. The cost of a national border is estimated to have fallen by around 10% per year for total manufacturing trade since the 1970s. The decline has been 13% per year for exports of final goods and 8% for intermediate inputs, highlighting the importance of reduced border effects for enabling international trade in the age of GVCs. Moreover, we show that it is important to control for different border effects for final goods and intermediate inputs when estimating the trade impact of FTAs in gravity equations. With this enhancement, our results suggest that FTAs increase trade by 54% after ten years. We also find evidence that FTAs that are more recent have a greater trade effect than those signed in earlier periods.
- JEL Code:
- F13,F14,F15,F23
- 15 May 2020
-
Euro area balance of payments and international investment position statistics - Quality reportAnnexes
- 15 May 2020
- 15 May 2020
-
Euro area quarterly financial accounts - Quality reportAnnexes
- 15 May 2020
- 15 May 2020
- 14 May 2020
-
Working Paper Series - Issue No. 2409Details
- Abstract:
- Using credit-registry data for Spain and Peru, we document that four main types of commercial credit—asset-based loans, cash-flow loans, trade finance and leasing—are easily identifiable and represent the bulk of corporate credit. We show that credit dynamics and bank lending channels vary across these loan types. Moreover, aggregate credit supply shocks previously identified in the literature appear to be driven by individual loan types. The effects of monetary policy and the effects of the financial crisis propagating through banks’ balance sheets are primarily driven by cash-flow loans, whereas asset-based credit is mostly insensitive to these types of effects.
- JEL Code:
- E5,G21
- 14 May 2020
-
Working Paper Series - Issue No. 2408Details
- Abstract:
- This study seeks to answer whether it is possible to design an early warning system framework that can signal the risk of fiscal stress in the near future, and what shape such a system should take. To do so, multiple models based on econometric logit and the random forest models are designed and compared. Using a dataset of 20 annual frequency variables pertaining to 43 advanced and emerging countries during 1992-2018, the results confirm the possibility of obtaining an effective model, which correctly predicts 70-80% of fiscal stress events and tranquil periods. The random forest-based early warning model outperforms logit models. While the random forest model is commonly understood to provide lower interpretability than logit models do, this study employs tools that can be used to provide useful information for understanding what is behind the black-box. These tools can provide information on the most important explanatory variables and on the shape of the relationship between these variables and the outcome classification. Thus, the study contributes to the discussion on the usefulness of machine learning methods in economics.
- JEL Code:
- C40,C53,H63,G01
- 14 May 2020
- 14 May 2020
-
Economic Bulletin
- 14 May 2020
-
Economic Bulletin - BoxEconomic Bulletin Issue 3, 2020Details
- Abstract:
- In this box we review price measurement issues that can arise in times of economic distress. First, we discuss how consumers’ substitution across items in the face of an economic downturn can drive a wedge between published statistics and household consumption prices. We present some evidence from previous recessions along with the historical weights of the aggregated HICP. Second, we discuss additional challenges generated by the ongoing Coronavirus outbreak. Lastly, we discuss possible implications for policymakers.
- JEL Code:
- E2,E3,E4
- 14 May 2020
-
InterviewDetails
- Subtitle:
- Interview with Fabio Panetta, Member of the Executive Board of the ECB, conducted by Andras Szigetvari on 6 May and published on 14 May 2020
- 13 May 2020
-
Working Paper Series - Issue No. 2407Details
- Abstract:
- This paper estimates and compares the international transmission of European Central Bank (ECB) and Federal Reserve System monetary policy in a unified and methodologically consistent framework. It identifies pure monetary policy shocks by purging them of the bias stemming from contemporaneous central bank information effects. The results suggest that there is a hierarchy in the global spillovers from ECB and Federal Reserve monetary policy: while the spillovers to consumer prices are relatively small in both directions, Federal Reserve monetary policy shocks have a larger impact on euro area financial markets and real activity. Federal Reserve monetary policy also has a significantly larger impact than ECB monetary policy on real and financial variables in the rest of the world.
- JEL Code:
- E44,E52,F3,E58,F42
- Network:
- Research Task Force (RTF)
- 13 May 2020
-
Working Paper Series - Issue No. 2406Details
- Abstract:
- Macroprudential policies are often aimed at the commercial banking sector, while a host of other non-bank financial institutions, or shadow banks, may not fall under their jurisdiction. We study the effects of tightening commercial bank regulation on the shadow banking sector. We develop a DSGE model that differentiates between regulated, monopolistic competitive commercial banks and a shadow banking system that relies on funding in a perfectly competitive market for investments. After estimating the model using euro area data from 1999 – 2014 including information on shadow banks, we find that tighter capital requirements on commercial banks increase shadow bank lending, which may have adverse financial stability effects. Coordinating macroprudential tightening with monetary easing can limit this leakage mechanism, while still bringing about the desired reduction in aggregate lending. In a counterfactual analysis, we compare how macroprudential policy implemented before the crisis would have dampened the business and lending cycles.
- JEL Code:
- E32,E58,G23
- Network:
- Research Task Force (RTF)
- 13 May 2020
-
Discussion Paper Series - Issue No. 10Details
- Abstract:
- This paper estimates and compares the international transmission of European Central Bank (ECB) and Federal Reserve System monetary policy in a unified and methodologically consistent framework. It identifies pure monetary policy shocks by purging them of the bias stemming from contemporaneous central bank information effects. The results suggest that there is a hierarchy in the global spillovers from ECB and Federal Reserve monetary policy: while the spillovers to consumer prices are relatively small in both directions, Federal Reserve monetary policy shocks have a larger impact on euro area financial markets and real activity. Federal Reserve monetary policy also has a significantly larger impact than ECB monetary policy on real and financial variables in the rest of the world.
- JEL Code:
- E44,E52,F3,E58,F42
- 13 May 2020
-
Euro area securities issues statistics
- 13 May 2020
-
Economic Bulletin - ArticleEconomic Bulletin Issue 3, 2020Details
- Abstract:
- This article explains how negative rates are transmitted via banks and financial markets, both via standard transmission channels and via channels specific to negative interest rates. The latter can enhance the stimulus, but may also hinder it, in particular in the case of protracted periods of negative rates. Euro area bank profitability has been persistently low since the financial crisis, and this has the potential to impair bank lending. At the same time, profits have increased since 2014 and the impact of negative interest rates is assessed as broadly neutral so far, as the negative contribution to net interest income has been offset by the positive impact on borrower creditworthiness. Finally, the article reports empirical evidence – drawn from a range of studies – on how negative rates affect the broader economy, starting with bank portfolio allocation decisions, lending volumes and lending rates. The article then elaborates on the impact of the negative rate policy on key macroeconomic aggregates, notably economic activity and inflation.
- JEL Code:
- E42,E52,G21
- 12 May 2020
-
InterviewDetails
- Subtitle:
- Interview with Philip R. Lane, Member of the Executive Board of the ECB, conducted by Dorinde Meuzelaar and Martin Visser on 8 May 2020 and published on 12 May 2020
- 12 May 2020
-
Weekly financial statementAnnexes
- 12 May 2020
-
Weekly financial statement - Commentary
- 12 May 2020
-
Working Paper Series - Issue No. 2405Details
- Abstract:
- This paper studies the impact of cyclical systemic risk on future bank profitability for a large representative panel of EU banks between 2005 and 2017. Using linear local projections we show that high current levels of cyclical systemic risk predict large drops in the average bank-level return on assets (ROA) with a lead time of 3-5 years. Based on quantile local projections we further show that the negative impact of cyclical systemic risk on the left tail of the future bank-level ROA distribution is an order of magnitude larger than on the median. Given the tight link between negative profits and reductions in bank capital, our method can be used to quantify the level of “Bank capital-at-risk” for a given banking system, akin to the concept of “Growth-at-risk”. We illustrate how the method can inform the calibration of countercyclical macroprudential policy instruments.
- JEL Code:
- G01,G17,C22,C54,G21
- 12 May 2020
-
Working Paper Series - Issue No. 2404Details
- Abstract:
- Two approaches are considered to incorporate judgment in DSGE models. First, Bayesian estimation indirectly imposes judgment via priors on model parameters, which are then mapped into a judgmental interest rate decision. Standard priors are shown to be associated with highly unrealistic judgmental decisions. Second, judgmental interest rate decisions are directly provided by the decision maker, and incorporated into a formal statistical decision rule using frequentist procedures. When the observed interest rates are interpreted as judgmental decisions, they are found to be consistent with DSGE models for long stretches of time, but excessively tight in the 1980s and late 1990s and excessively loose in the late 1970s and early 2000s.
- JEL Code:
- E50,E58,E47,C12,C13
- 12 May 2020
-
Economic Bulletin - BoxEconomic Bulletin Issue 3, 2020Details
- Abstract:
- The growth slowdown in 2018-2019 was characterised by a marked divergence of industrial production and retail sales. This box seeks to uncover whether the euro area economy was hit by aggregate or sectoral shocks in this period. It finds that most of the growth slowdown can be explained by a series of adverse sectoral shocks. It also finds that, on average, sectoral shocks have a less persistent impact on economic activity than aggregate shocks. The recent COVID-19 shock is undoubtedly an aggregate shock. Yet its impact on economic activity over time remains very uncertain as its characteristics differ substantially from past aggregate shocks.
- JEL Code:
- E21,E23,E32
- 12 May 2020
-
Economic Bulletin - BoxEconomic Bulletin Issue 3, 2020Details
- Abstract:
- This box suggests that between January 2018 and February 2020 both foreign and domestic factors contributed substantially to the decline in manufacturing growth in the euro area, while services were more resilient. Economic activity fell sharply in March 2020 as a result of the spread of the coronavirus (COVID-19), although part of the drop in manufacturing and services is explained by domestic factors. Owing to the coronavirus and the associated containment measures, the economic outlook remains highly uncertain.
- JEL Code:
- E32,F44,C50
- 11 May 2020
-
SpeechDetails
- Subtitle:
- Speech by Yves Mersch, Member of the Executive Board of the ECB and Vice-Chair of the Supervisory Board of the ECB, at the Consensus 2020 virtual conference, 11 May 2020
- 11 May 2020
- 11 May 2020
- 11 May 2020
- 11 May 2020
-
Economic Bulletin - ArticleEconomic Bulletin Issue 3, 2020Details
- Abstract:
- Aggregate exchange rate pass-through (ERPT) to import and consumer prices is lower in the EU than it was in the 1990s and is found to be non-linear. Low estimated aggregate ERPT to consumer prices does not mean that the exchange rate movements do not matter for inflation, as aggregate estimates mask substantial heterogeneities across countries, industries and time periods due to structural, cyclical and policy factors. Key structural characteristics that explain ERPT across industries or sectors are: import content of consumption; share of imports invoiced in own currency or in a third dominant currency; integration of a country and its trading partners in global value chains; and market power. In line with the literature, different types of shocks that move the exchange rate in the euro area elicit different price responses, so the combination of shocks that lie behind changes in the exchange rate at any point in time matters for the ERPT. Finally, monetary policy itself affects the ERPT and credible and active monetary policy lowers the observed ex post ERPT. Moreover, under the effective lower bound, credible non-standard monetary policy actions have a larger ERPT to consumer prices. Instead of rules of thumb, in order to assess the impact of exchange rate changes when forecasting inflation, it is better to use structural models with sufficient feedback loops that take into account the role of expectations and monetary policy reaction.,share of imports invoiced in own currency or in a third dominant currency,integration of a country and its trading partners in global value chains,and market power. In line with the literature, different types of shocks that move the exchange rate in the euro area elicit different price responses, so the combination of shocks that lie behind changes in the exchange rate at any point in time matters for the ERPT. Finally, monetary policy itself affects the ERPT and credible and active monetary policy lowers the observed ex post ERPT. Moreover, under the effective lower bound, credible non-standard monetary policy actions have a larger ERPT to consumer prices. Instead of rules of thumb, in order to assess the impact of exchange rate changes when forecasting inflation, it is better to use structural models with sufficient feedback loops that take into account the role of expectations and monetary policy reaction.
- JEL Code:
- E31,F31,F41
- 11 May 2020
-
InterviewDetails
- Subtitle:
- Interview with Isabel Schnabel, Member of the Executive Board of the ECB, conducted by Tonia Mastrobuoni and published on 11 May 2020
- 8 May 2020
-
SpeechDetails
- Subtitle:
- Opening remarks by Christine Lagarde, President of the ECB, at the Online Edition of The State of the Union conference organised by the European University Institute
- 8 May 2020
-
Working Paper Series - Issue No. 2403Details
- Abstract:
- We present evidence that referenda have a significant, detrimental outcome on investment. Employing an unsupervised machine learning algorithm over the period 2008-2017, we construct three important uncertainty indices underlying reports in the Scottish news media: Scottish independence (IndyRef)-related uncertainty; Brexit-related uncertainty; and Scottish policy-related uncertainty. Examining the relationship of these indices with investment on a longitudinal panel of 3,589 Scottish firms, the evidence suggests that Brexit-related uncertainty associates more strongly than IndyRef -related uncertainty to investment. Our preferred specification suggests that a one standard-deviation increase in Brexit uncertainty foreshadows a reduction in investment by 8% on average in the following year. Besides we find that the uncertainty associated with the Scottish referendum for independence while negligible at the aggregate level, relates more strongly with the investment of listed firms as well as those operating on the border with England. In addition, we present evidence of greater sensitivity to these indices among firms that are financially constrained or whose investment is to a greater degree irreversible.
- JEL Code:
- C80,D80,E22,E66,G18,G31
- 8 May 2020
-
Press releaseRelated
- 8 May 2020
-
Survey on the Access to Finance of Enterprises in the euro area
- 8 May 2020
-
Survey on the Access to Finance of Enterprises in the euro areaAnnexes
- 8 May 2020
-
SAFE questionnaire
- 7 May 2020
-
Working Paper Series - Issue No. 2402Details
- Abstract:
- We study how differences in the aggregate structure of corporate debt affect the transmission of monetary policy in a panel of euro area countries. We find that standard policy tightening shocks raise the cost of loans relative to corporate bonds. In economies with a high share of bond finance, the resultant rise in the overall cost of credit is less pronounced as a smaller portion of corporate debt is remunerated at the loan rate and firms further expand their reliance on bonds. In economies with a low share of bond finance, the rise in the cost of credit is reinforced by a shift in the composition of debt towards bank loans. As a consequence, a higher bond share goes along with a weaker transmission of short-term policy rate shocks to real activity. By contrast, the real effects of monetary policy shocks to longer-term yields strengthen with the share of bond finance in the economy.
- JEL Code:
- E44,E52,G21,G23
- 7 May 2020
-
Working Paper Series - Issue No. 2401Details
- Abstract:
- This paper analyses the endogeneity of euro area total factor productivity and its role in business cycle amplification by estimating a medium-scale DSGE model with endogenous productivity mechanism on euro area data. In this framework, total factor productivity evolves endogenously as a consequence of costly investment in R&D and adoption of new technologies. We find that the endogeneity of TFP induces a high degree of persistence in the euro area business cycle via a feedback mechanism between overall economic conditions and investment in productivity-enhancing technologies. As to the sources of the euro area productivity slowdown, we conclude that a decrease in the efficiency of R&D investment is among the key factors generating the pre-crisis productivity slowdown, while starting from the Great Recession a shock to liquidity demand is identified as the most important driving force. The endogenous technology mechanism further exerts a dampening effect on the inflation response following a recessionary shock and hence has important implications for both the negligible fall in inflation during the Great Recession, as well as the sluggish increase of inflation in the subsequent recovery.
- JEL Code:
- E24,E32,O31
- 7 May 2020
-
Annual Report - Statistical annex - Issue No. 2019
- 7 May 2020
-
Other publicationRelated
- 7 May 2020
-
Annual Report
- 7 May 2020
-
SpeechDetails
- Subtitle:
- Introductory remarks by Luis de Guindos, Vice-President of the ECB
Related- 7 May 2020
-
Annual Report
- 7 May 2020
-
Feedback on the input provided by the European Parliament as part of its resolution on the ECB’s Annual ReportRelated
- 7 May 2020
-
Annual Report
- 7 May 2020
-
Annual ReportRelated
- 7 May 2020
- 7 May 2020
- 7 May 2020
-
Other publication
- 20 February 2020
-
Annual Accounts
- 6 May 2020
-
MFI interest rate statistics
- 5 May 2020
- 5 May 2020
-
Macroprudential Bulletin - Article - Issue No. 10Details
- Abstract:
- Stablecoins provide an alternative to volatile crypto-assets. Depending on their asset management function, they may fall under different regulatory regimes or – with certain design features – under none at all. Given their potential size, global stablecoins could pose risks to financial stability. Such arrangements need a robust regulatory framework.
- JEL Code:
- E42,G15,G28
- 5 May 2020
-
Weekly financial statementAnnexes
- 5 May 2020
-
Weekly financial statement - Commentary
- 5 May 2020
-
Working Paper Series - Issue No. 2400Details
- Abstract:
- We explain the role of the Phillips Curve in the analysis of the economic outlook and the formulation of monetary policy at the ECB. First, revisiting the structural Phillips Curve, we highlight the challenges in recovering structural parameters from reduced-form estimates and relate the reduced-form Phillips Curve to the (semi-)structural models used at the ECB. Second, we identify the slope of the structural Phillips Curve by exploiting cross-country variation and by using high-frequency monetary policy surprises as instruments. Third, we present reduced-form evidence, focusing on the relation between slack and inflation and the role of inflation expectations. In relation to the recent weakness of inflation, we discuss the role of firm profits in the pass-through from wages to prices and the contribution of external factors. Overall, the available evidence supports the view that the absorption of slack and a firm anchoring of inflation expectations remain central to successful inflation stabilisation.
- JEL Code:
- E31,E52
- 4 May 2020
-
Governing Council decisions - Other decisions
- 4 May 2020
-
Working Paper Series - Issue No. 2399Details
- Abstract:
- We consider the effects of quantitative easing on liquidity and prices of bonds in a search-and matching model. The model explicitly distinguishes between demand and supply effects of central bank asset purchases. Both are shown to lead to a decline in yields, while they have opposite effects on market liquidity. This results in a price-liquidity trade-off. Initially, liquidity improves in reaction to central bank demand. As the central bank buys and holds bonds, supply becomes scarcer and other buyers are crowded out. As a result, liquidity can fall below initial levels. The magnitude of the effects depend on the presence of preferred habitat investors. In markets with a higher share of these investors, bonds are scarcer and central bank asset purchases lower yields more. With a lower share of preferred habitat investors and a relatively illiquid market, central bank demand has a stronger positive effect on liquidity. We are the first to construct an index from bond holding data to measure the prevalence of preferred habitat investors in each euro area country. Subsequently, we calibrate the model to the euro area and show how yields and liquidity are affected by the European Central Banks asset purchase programme.
- JEL Code:
- E52,E58,G12
- Network:
- Research Task Force (RTF)
- 4 May 2020
-
Press releaseRelated
- 4 May 2020
-
Survey of Professional Forecasters
- 4 May 2020
-
Survey of Professional ForecastersAnnexes
- 4 May 2020
Related- 4 May 2020
- 4 May 2020
-
€STR Transparency on errors
- 1 May 2020
-
The ECB BlogDetails
- Subtitle:
- In an ECB Blog post, Chief Economist Philip R. Lane discusses the macroeconomic scenarios developed by ECB staff to illustrate the possible impact of the pandemic. He also explains current monetary policy and outlines the approach to setting the future course of monetary policy.
- 1 May 2020
-
Economic Bulletin - BoxEconomic Bulletin Issue 3, 2020Details
- Abstract:
- This box presents illustrative ECB staff scenarios for the impact of the COVID-19 pandemic on economic activity in the euro area. The unprecedented uncertainty surrounding the developments and economic impact of the COVID-19 pandemic warrants an analysis based on alternative scenarios. These illustrative ECB staff scenarios point to a drop in euro area GDP of between 5% and 12% in 2020. At its trough, quarterly real GDP growth could be as low as around -15% in the second quarter of 2020 under a severe scenario.
- JEL Code:
- E21,E22,E33
- 30 April 2020
-
Monetary policy decision
- 30 April 2020
-
Monetary policy decision
- 30 April 2020
-
Monetary policy statementDetails
- Subtitle:
- Christine Lagarde, President of the ECB,Luis de Guindos, Vice-President of the ECB,Frankfurt am Main, 30 April 2020
- 30 April 2020
-
Monetary policy decision
- 29 April 2020
- 29 April 2020
-
Euro area economic and financial developments by institutional sector (full)
- 29 April 2020
-
Monetary developments in the euro areaAnnexes
- 29 April 2020
-
Monetary developments in the euro area
- 28 April 2020
-
Weekly financial statementAnnexes
- 28 April 2020
-
Weekly financial statement - Commentary
- 28 April 2020
-
Other publicationAnnexes
- 28 April 2020
-
Other publication
- 28 April 2020
-
Other publication
- 28 April 2020
-
Euro area bank lending survey - Issue No. 2020Annexes
- 28 April 2020
-
Euro area bank lending survey - Annex
Related- 28 April 2020
-
Press release
- 28 April 2020
-
Press releaseRelated
- 28 April 2020
-
Euro area bank lending survey - Issue No. 2020
- 28 April 2020
-
The ECB BlogDetails
- Subtitle:
- The ECB is working to protect the continuity and safety of payments during the coronavirus pandemic, writes Executive Board member Fabio Panetta in The ECB Blog. Europeans can trust in our commitment to support them throughout this crisis.
- 22 April 2020
- 22 April 2020
- 22 April 2020
-
The ECB BlogDetails
- Subtitle:
- The ECB’s collateral easing package ensures that banks retain access to central bank liquidity at favourable terms, explain Vice-President Luis de Guindos and Executive Board member Isabel Schnabel. Improved collateral availability helps banks to continue lending to the real economy.
- 22 April 2020
-
Working Paper Series - Issue No. 2398Details
- Abstract:
- We show that negative monetary policy rates induce systemic banks to reach-for-yield. For identification, we exploit the introduction of negative deposit rates by the European Central Bank in June 2014 and a novel securities register for the 26 largest euro area banking groups. Banks with more customer deposits are negatively affected by negative rates, as they do not pass negative rates to retail customers, in turn investing more in securities, especially in those yielding higher returns. Effects are stronger for less capitalized banks, private sector (financial and non-financial) securities and dollar-denominated securities. Affected banks also take higher risk in loans.
- JEL Code:
- E43,E52,E58,G01,G21
- Network:
- Research Task Force (RTF)
- 22 April 2020
-
Occasional Paper Series - Issue No. 241Details
- Abstract:
- Aggregate exchange rate pass-through (ERPT) to import and consumer prices in the EU is currently lower than it was in the 1990s and is non-linear. Low estimated aggregate ERPT to consumer prices does not at all mean that exchange rate movements do not have an impact on inflation, as aggregate rules of thumb mask substantial heterogeneities across countries, industries and time periods owing to structural, cyclical and policy factors. Looking also at new micro evidence, four key structural characteristics explain ERPT across industries or sectors: (i) import content of consumption, (ii) share of imports invoiced in own currency or in a third dominant currency, (iii) integration of a country and its trading partners in global value chains, and (iv) market power. In the existing literature there is also a robust evidence across models showing that each shock which causes the exchange rate to move has a different price response, meaning that the combination of shocks that lies behind the cycle at any point in time has an impact on ERPT.Finally, monetary policy itself affects ERPT. Credible and aggressive monetary policy reduces the observed ex post ERPT, as agents expect monetary policy to counteract deviations of inflation from target, including those relating to exchange rate fluctuations. Moreover, under the effective lower bound, credible non-standard monetary policy actions result in greater ERPT to consumer prices. This paper recommends moving away from rule-of-thumb estimates and instead using structural models with sufficient feedback loops, taking into account the role of expectations and monetary policy reactions, to assess the impact of exchange rate changes when forecasting inflation.
- JEL Code:
- C50,E31,E52,F31,F41
- 22 April 2020
- 22 April 2020
- 22 April 2020
- 22 April 2020
- 22 April 2020
- 21 April 2020
-
Weekly financial statementAnnexes
- 21 April 2020
-
Weekly financial statement - Commentary
- 21 April 2020
-
InterviewDetails
- Subtitle:
- Contribution by Fabio Panetta, Member of the Executive Board, European Central Bank, published by Politico on 21 April 2020
- 21 April 2020
-
Working Paper Series - Issue No. 2397Details
- Abstract:
- We study the effects of credit over the business cycle, distinguishing between expansions and contractions. We find that there is a growth and risk trade-off in the pace of credit growth over the business cycle. While rapid credit growth tends to be followed by deeper recessions, we also find that credit growth has a positive impact on the duration of expansions. This poses a trade-off for the policymaker: Limiting the buildup of financial risk to avoid a deep recession can negatively affect the cumulation of economic growth during the expansion. We show that intermediate levels of credit growth maximize long-term growth while limiting volatility. Macroprudential policies should be used to manage this growth and risk trade-off, striking a balance between allowing expansions to last longer and avoiding deep recessions.
- JEL Code:
- C22,E32,E61
- Network:
- Research Task Force (RTF)
- 21 April 2020
-
Occasional Paper Series - Issue No. 240Details
- Abstract:
- The paper describes the main transmission channels of the spillovers of national fiscal policies to other countries within the euro area and investigates their magnitude using different models. In the context of Economic and Monetary Union (EMU), fiscal spillovers are relevant for the accurate assessment of the cyclical outlook in euro area countries, as well as in the debates on a coordinated change in the euro area fiscal stance and on a euro area fiscal capacity. The paper focuses on spillovers from expenditure-based expansions by presenting two complementary exercises. The first is an empirical investigation of spillovers based on a new, long quarterly dataset for the largest euro area countries and on new estimates based on annual data for a panel of 11 euro area countries. The second uses a multi-country general equilibrium model with a rich fiscal specification and the capacity to analyse trade spillovers. Fiscal spillovers are found to be heterogeneous but generally positive among euro area countries. The reaction of interest rates to fiscal expansions is an important determinant of the magnitude of spillovers.
- 21 April 2020
-
Research Bulletin - Issue No. 70Details
- Abstract:
- How do systemic banks in the euro area react to negative central bank interest rates? This article suggests that they do not generally pass negative rates on to their depositors, and that they search for yield by investing in riskier securities. Their investments are directed more towards securities issued by the private sector and denominated in dollars – in addition to euro.
- JEL Code:
- E43,E52,E58,G01,G21
- Network:
- Research Task Force (RTF)
- 20 April 2020
-
Working Paper Series - Issue No. 2396Details
- Abstract:
- Several European countries are currently considering reversing parts of their pension reforms that were adopted previously to improve sustainability. In this paper we present a framework that allows us to quantify the macroeconomic and fiscal costs of such reversals. We thereby integrate the country-specific information from the latest Ageing Report into a dynamic general equilibrium model with overlapping generations. Focusing on Germany and Slovakia as country cases, our model replicates the Ageing Report's pension expenditure projections very well. We calculate the macroeconomic impact of first the additional pension reforms needed to contain the public debt pressures arising from population ageing and second the costs of reform reversals. Our model results show that undoing past pension reforms would generate substantial adverse macroeconomic costs and could pose challenges for fiscal sustainability.
- JEL Code:
- H55,J11,J26
- 20 April 2020
-
Working Paper Series - Issue No. 2395Details
- Abstract:
- This paper presents a new dataset on the dynamics of non-performing loans (NPLs) during 88 banking crises since 1990. The data show similarities across crises during NPL build-ups but less so during NPL resolutions. We find a close relationship between NPL problems—elevated and unresolved NPLs—and the severity of post-crisis recessions. A machine learning approach identifies a set of pre-crisis predictors of NPL problems related to weak macroeconomic, institutional, corporate, and banking sector conditions. Our findings suggest that reducing pre-crisis vulnerabilities and promptly addressing NPL problems during a crisis are important for post-crisis output recovery.
- JEL Code:
- E32,E44,G21,N10,N20
Annexes- 20 April 2020
- 20 April 2020
-
Balance of payments (monthly)
- 18 April 2020
-
InterviewDetails
- Subtitle:
- Interview with Luis de Guindos, Vice-President of the ECB, conducted by João Silvestre on 15 April 2020
- 17 April 2020
-
Working Paper Series - Issue No. 2394Details
- Abstract:
- Assigning a discretionary central bank a mandate to stabilize an average inflation rate—rather than a period-by-period inflation rate—increases welfare in a New Keynesian model with an occasionally binding lower bound on nominal interest rates. Under rational expectations, the welfare-maximizing averaging window is infinitely long, which means that optimal average inflation targeting (AIT) is equivalent to price level targeting (PLT). However, AIT with a finite, but sufficiently long, averaging window can attain most of the welfare gain from PLT. Under boundedly-rational expectations, if cognitive limitations are sufficiently strong, the optimal averaging window is finite, and the welfare gain of adopting AIT can be small.
- JEL Code:
- E31,E52,E58,E61,E71
- 17 April 2020
-
Working Paper Series - Issue No. 2393Details
- Abstract:
- This paper proposes a set of indicators relevant for the risk characteristics of covered bonds, as based on granular publicly available transparency data. The indicators capture various aspects of cash flow risks related to the issuer, the cover pool and the payment structure. They offer unified risk metrics for the European covered bond universe, which ensures comparability across covered bonds issued by different issuers and rated by different credit rating agencies. The availability of granular risk indicators adds to the overall transparency of the market in the context of risk monitoring.
- JEL Code:
- G12,G24,G21,C30
- 16 April 2020
-
SpeechDetails
- Subtitle:
- Statement by Christine Lagarde, President of the ECB, at the forty-first meeting of the International Monetary and Financial Committee
- 16 April 2020
-
SpeechDetails
- Subtitle:
- Remarks by Isabel Schnabel, Member of the Executive Board of the ECB, at a 24-Hour Global Webinar co-organised by the SAFE Policy Center on “The COVID-19 Crisis and Its Aftermath: Corporate Governance Implications and Policy Challenges”
Annexes- 16 April 2020
-
Speech
- 16 April 2020
-
Working Paper Series - Issue No. 2392Details
- Abstract:
- The European Single Market created a common market for millions of Europeans. However, thirty years after its introduction, it appears that the benefits of the common European project are occasionally being questioned at least by some parts of the population. Others, by contrast, strive for deeper integration. Against this background, we empirically gauge the growth effect that arose from the Single Market. Using the Synthetic Control Method, we establish the growth premium for the Single Market overall and for its founding members. Broadly in line with the predictions made by Baldwin (1989) at the onset of the Single Market project, we find significantly higher real GDP per capita for the overall Single Market area of around 12-22%. In comparison, smaller EU Member States seem to have benefited somewhat more compared to larger countries. The estimated growth effects underline the case for further deepening and broadening the Single Market where possible.
- JEL Code:
- F13,F14,F15,N14
- 16 April 2020
-
Working Paper Series - Issue No. 2391Details
- Abstract:
- Innovative firms with good ideas may still struggle to fine-tune them to the stage where they can attract outside funding. We conduct a five-country randomized experiment that tests the impact of an investment readiness program. Firms then pitched their ideas to independent judges. The program resulted in a 0.3 standard deviation increase in the investment readiness score. Two years later, the average impacts on firm investment outcomes are positive, but small in magnitude, and not statistically significant. Larger and statistically significant impacts on receiving outside funding occur for smaller firms, and for firms with lower likelihoods of otherwise being funded.
- JEL Code:
- L26,M2,M13,O1
- 15 April 2020
-
Weekly financial statementAnnexes
- 15 April 2020
-
Weekly financial statement - Commentary
- 15 April 2020
- 15 April 2020
- 15 April 2020
- 15 April 2020
-
Research Bulletin - Issue No. 69Details
- Abstract:
- How does the presence of “shadow banks” – non-bank, unregulated financial intermediaries – affect the ability of central banks to tackle a liquidity crisis? To address this question, we develop an asset pricing model with both bank and non-bank financial institutions. A crucial part of the model is that banks intermediate liquidity between the central bank and non-banks, but this intermediation stops during a financial crisis. Non-banks are then left without a lender-of-last-resort, and central bank liquidity operations with banks are not sufficient to mitigate the crisis. In our stylized model, opening liquidity facilities to non-banks and purchasing illiquid assets are then essential measures to tackle a liquidity crisis.
- JEL Code:
- E43,E44,E52,G12
- Network:
- Research Task Force (RTF)
- 14 April 2020
-
Survey of Monetary Analysts
- 14 April 2020
-
Euro area securities issues statistics
- 12 April 2020
-
InterviewDetails
- Subtitle:
- Interview with Luis de Guindos, Vice-President of the ECB, conducted by Manel Pérez and published on 12 April 2020
- 9 April 2020
-
InterviewDetails
- Subtitle:
- Interview with Christine Lagarde, President of the ECB, conducted by Ali Baddou and Carine Bécard on 9 April 2020
- 9 April 2020
-
Monetary policy account
- 9 April 2020
-
Monetary policy account
- 9 April 2020
-
The ECB BlogDetails
- Subtitle:
- Our response to coronavirus is designed to reach the firms and families facing a steep loss of income and rising anxiety about the future, writes President Christine Lagarde. She adds that full alignment of fiscal and monetary policies is the best way to protect productive capacity and employment.
- 8 April 2020
-
InterviewDetails
- Subtitle:
- Interview with Christine Lagarde, President of the ECB, conducted by Matthieu Pelloli and published on 9 April 2020
- 8 April 2020
-
Weekly financial statementAnnexes
- 8 April 2020
-
Weekly financial statement - Commentary
- 8 April 2020
-
Other publicationDetails
- Subtitle:
- Colloquium in honour of Benoît Coeuré, held on 17-18 December 2019
- 8 April 2020
-
Occasional Paper Series - Issue No. 239Details
- Abstract:
- After the financial and economic crisis in Europe, a broad consensus has emerged that a stronger fiscal dimension may be needed to complete the architecture of Economic and Monetary Union (EMU). This paper analyses the performance of interregional transfers in existing fiscal-federal systems, notably in Austria, Belgium, Germany, Spain and the United States, and aims to draw lessons for the design of a euro area fiscal instrument. The empirical risk-sharing analysis in this paper suggests that effective cross-regional stabilisation of asymmetric shocks tends to work via direct cash transfers to households, such as unemployment benefits, which are financed out of cyclical central government taxes and social security contributions. This would suggest that a euro area budgetary instrument for stabilisation should be designed as a tool that enhances the automatic stabilisation capacity in the single currency area. At the same time, it seems important that a prospective central stabilisation instrument for the euro area would be integrated in an overall fiscal policy framework that ensures proper incentives for national policymakers.
- JEL Code:
- E62,H11,H77
- 7 April 2020
- 7 April 2020
-
Working Paper Series - Issue No. 2390Details
- Abstract:
- This paper provides new evidence on the channels of monetary policy transmission combining 9 million observations on firm level investment and high-frequency identified monetary policy shocks. We show that the reaction of firms’ investment to a monetary policy shock is heterogeneous along dimensions that correspond to the two main channels of monetary policy transmission. First, we show that young firms are more sensitive to monetary policy shocks, supporting the existence of a credit channel of monetary policy. Second, we document large cross-sectional heterogeneity related to the industry the firm operates in. We find that firms producing durable goods react more than others, which is consistent with traditional interest rate channel effects of monetary policy. Third, we find that the effect of monetary policy shocks is longer lived for firms that are durable goods producers than for young firms indicating that demand effects last longer than credit effects.
- JEL Code:
- E22,E52
- 7 April 2020
-
Working Paper Series - Issue No. 2389Details
- Abstract:
- We analyse the effect of shocks to housing wealth and income before and after the Great Recession. We combine datasets containing information on expenditure, income, wealth and debt in a synthetic panel to understand how household indebtedness affects the response to income and wealth shocks. We find evidence for both a housing wealth effect and income shocks depressing household consumption during the crisis in Ireland. The long recovery of consumption is also related to high levels of indebtedness at the onset of the crisis. Households who entered the crisis with more debt are significantly more sensitive to changes in their income. In this way, household balance sheets can be an important amplification mechanism for aggregate shocks.
- JEL Code:
- D14,D31,E21,H31
- Network:
- Household Finance and Consumption Network (HFCN)
- 7 April 2020
-
Euro area economic and financial developments by institutional sector (early)
- 7 April 2020
-
Euro money market statistics
- 7 April 2020
-
Balance of payments (quarterly)
- 6 April 2020
-
Working Paper Series - Issue No. 2388Details
- Abstract:
- We analyse euro area investors' portfolio rebalancing during the ECB's Asset Purchase Programme at the security level. Based on net transactions of domestic and foreign securities, we observe euro area sectors' capital flows into individual securities, cleaned from valuation effects. Our empirical analysis – which accounts for security-level characteristics – shows that euro area investors (in particular investment funds and households) actively rebalanced away from securities targeted under the Public Sector Purchase Programme and other euro-denominated debt securities, towards foreign debt instruments, including ‘closest substitutes’, i.e. certain sovereign debt securities issued by non-euro area advanced countries. This rebalancing was particularly strong during the first six quarters of the programme. Our analysis also reveals marked differences across sectors as well as country groups within the euro area, suggesting that quantitative easing has induced heterogeneous portfolio shifts.
- JEL Code:
- F21,F42,E52,G15
- 6 April 2020
-
Working Paper Series - Issue No. 2387Details
- Abstract:
- We document how the distribution of exchange rate returns responds to changes in global financial conditions. We measure global financial conditions as the common component of country-specific financial condition indices, computed consistently across a large panel of developed and emerging economies. Based on quantile regression results, we provide a characterisation and ranking of the tail behaviour of a large sample of currencies in response to a tightening of global financial conditions, corroborating (and quantifying) some of the prevailing narratives about safe haven and risky currencies. Our approach delivers a more nuanced picture than one based on standard OLS regression. We then carry out a portfolio sorting exercise to identify the macroeconomic fundamentals associated with such different tail behaviour, and find that currency portfolios sorted on the basis of net foreign asset positions, relative interest rates, current account balances and levels of international reserves display a higher likelihood of large losses in response to a tightening of global financial conditions.
- JEL Code:
- F31,G15
- 4 April 2020
-
InterviewDetails
- Subtitle:
- Interview with Isabel Schnabel, Member of the Executive Board of the ECB, conducted by Angelos Athanasopoulos and published on 4 April 2020
- 3 April 2020
-
The ECB BlogDetails
- Subtitle:
- Commercial paper purchases are key for monetary policy transmission to the real economy, explain Vice-President Luis de Guindos and Executive Board member Isabel Schnabel in The ECB Blog. They ease financing conditions for firms and help them manage short-term funding needs.
- 3 April 2020
-
Press release
- 2 April 2020
- 1 April 2020
-
MFI interest rate statistics
- 31 March 2020
-
Weekly financial statementAnnexes
- 31 March 2020
-
Weekly financial statement - Commentary
- 31 March 2020
-
Working Paper Series - Issue No. 2386Details
- Abstract:
- We study the cyclical dynamics of consumption in the euro area (EA) and the large EA countries by distinguishing durable from nondurable expenditures. We adopt a theoretical partial equilibrium framework to justify the identification strategy of our empirical model, a time-varying parameter structural vector autoregression (TVP-SVAR). Following the main insight from the theoretical model, that liquidity constraints induce important interactions between durables and nondurables, we distinguish durable-specific demand and supply shocks, while taking into account monetary and credit conditions. Our main findings are: (i) durables react faster and more strongly than nondurables after monetary shocks in the euro area and in the largest EA countries, a confirmation of an outcome commonly reported for the US; (ii) there is a large degree of cross-country heterogeneity in how different factors (including durable-specific ones) explain consumption; (iii) the strength of spillovers from durable to nondurable consumption, as predicted by theory, is empirically correlated with how much households across countries are likely to be liquidity constrained.
- JEL Code:
- C11,C32,D11,E21,E32
- 30 March 2020
-
InterviewDetails
- Subtitle:
- Interview with Luis de Guindos, Vice-President of the ECB, conducted by Carlos Herrera on 30 March 2020
- 30 March 2020
-
Working Paper Series - Issue No. 2385Details
- Abstract:
- We study the impact of monetary policy on regional inequality using granular data on economic activity at the city- and county-level in Europe. We document pronounced heterogeneity in the regional patterns of monetary policy transmission. The output response to monetary policy shocks is stronger and more persistent in poorer regions, with the difference becoming particularly pronounced in the tails of the distribution. Regions in the lower parts of the distribution exhibit hysteresis, consisting of long-lived adjustments in employment and labor productivity in response to the shocks. As a consequence, policy tightening aggravates regional inequality and policy easing mitigates it. Finally we provide a structural interpretation of our results using a New Keynesian Currency Union Model with hysteresis effects.
- JEL Code:
- C32,E32,E52
- 30 March 2020
-
Working Paper Series - Issue No. 2384Details
- Abstract:
- Recent policy discussion includes the introduction of diversification requirements for sovereign bond portfolios of European banks. In this paper, we evaluate the possible effects of these constraints on risk and diversification in the sovereign bond portfolios of the major European banks. First, we capture the dependence structure of European countries' sovereign risks and identify the common factors driving European sovereign CDS spreads by means of an independent component analysis. We then analyse the risk and diversification in the sovereign bond portfolios of the largest European banks and discuss the role of “home bias”, i.e. the tendency of banks to concentrate their sovereign bond holdings in their domicile country. Finally, we evaluate the effect of diversification requirements on the tail risk of sovereign bond portfolios. Under our assumptions about how banks rebalance their portfolio to respond to the new requirements, demanding that banks modify their holdings to increase their portfolio diversification may be ineffective in reducing portfolio risk, including tail risk.
- JEL Code:
- G01,G11,G21,G28
- 27 March 2020
-
Research Bulletin - Issue No. 68Details
- Abstract:
- In this article we examine the effects of reversing the pension reforms adopted since the early 2000s. We find that reversing past pension reforms would be very costly, and would put a disproportionate burden on current and future young generations. Even without reversals, further reforms are needed to address the adverse macroeconomic and fiscal impact of population ageing.
- JEL Code:
- F41,H55,J11
- 26 March 2020
-
Statistics Paper Series - Issue No. 36Details
- 26 March 2020
-
Statistics Paper Series - Issue No. 35Details
- 26 March 2020
- 26 March 2020
-
Monetary developments in the euro areaAnnexes
- 26 March 2020
-
Monetary developments in the euro area
- 26 March 2020
-
Economic Bulletin
- 26 March 2020
-
Economic Bulletin - BoxEconomic Bulletin Issue 2, 2020Details
- Abstract:
- This box assesses the impact of fiscal measures to address climate change on growth and inflation over the March 2020 ECB staff projection horizon. Policies to reduce greenhouse gas emissions in the EU comprise: (a) the EU Emissions Trading System (ETS) and (b) national measures in sectors which are not covered by the ETS. Overall, the baseline assumes some impact of climate measures on prices related to the German climate package, while the assumed impact of measures in other countries is limited.
- JEL Code:
- E3,Q58,E62
- 26 March 2020
-
Economic Bulletin - BoxEconomic Bulletin Issue 2, 2020Details
- Abstract:
- This box describes the ECB’s monetary policy operations during the seventh and eighth reserve maintenance periods of 2019, which ran from 30 October to 17 December 2019 and from 18 December 2019 to 28 January 2020, respectively.
- JEL Code:
- E40,E52,E58
- 26 March 2020
-
Economic Bulletin - ArticleEconomic Bulletin Issue 2, 2020Details
- Abstract:
- This article first stresses the importance for a central bank of having a reliable quantitative framework for obtaining a real-time assessment of developments in economic activity in the near term and discusses associated challenges. Second, it presents the framework for short-term forecasting of euro area real GDP growth used at the ECB. The article evaluates the forecast performance of the framework, also comparing it with the Eurosystem/ECB staff macroeconomic projections. It also illustrates how the framework is used to i) analyse the role that data surprises play in the revisions to the outlook and ii) assess risks to the projections. It concludes by pointing out directions for future work.
- JEL Code:
- C33,C53,E32,E37,E52
- 25 March 2020
-
Working Paper Series - Issue No. 2383Details
- Abstract:
- This paper decomposes the time-varying effect of exogenous exchange rate shocks on euro area countries inflation into country-specific (idiosyncratic) and region-wide (common) components. To do so, we propose a flexible empirical framework based on dynamic factor models subject to drifting parameters and exogenous information. We show that exogenous shocks to the EUR/USD exchange rate account for over 50% of nominal EUR/USD exchange rate fluctuations in more than a third of the quarters of the past six years, especially in turning point periods. Our main results indicate that headline inflation in euro area countries, and in particular its energy component, has become significantly more affected by these exogenous exchange rate shocks since the early 2010s, in particular for the region's largest economies. While in the case of headline inflation this increasing sensitivity is solely reliant on a sustained surge in the degree of comovement, for energy inflation it is also based on a higher region-wide effect of the shocks. By contrast, purely exogenous exchange rate shocks do not seem to have a significant impact on the core component of headline inflation, which also displays a lower degree of comovement across euro area countries.
- JEL Code:
- C32,E31,F31,F41
- 25 March 2020
-
Working Paper Series - Issue No. 2382Details
- Abstract:
- Can the aging process affect inflation? The prolonged decline of fertility and mortality rates induces a persistent downward pressure on the natural interest rate. If this development is not internalized by the monetary policy rule, inflation can be on a downward trend. Using the structure of a two-sector overlapping generations model embedded in a New-Keynesian framework with price frictions, calibrated for the euro area, this paper shows that following a commonly specified monetary policy rule the economy features a ”disinflationary bias” since 1990, in a way that can match the downward trend of core inflation found in the data for the euro area. In this model, continuing to follow the same rule makes inflation to be on a declining pattern at least until 2030. At the same time, changing consumption patterns towards nontradable items such as health-care generate a small ”inflationary bias” a positive deviation of inflation from target of less than 0.1 percentage points between 1990 and 2030. In the model setting of this paper, this inflationary bias is not strong enough to counteract the disinflationary bias generated by the downward impact of aging on the natural interest rate.
- JEL Code:
- E43,E52,E58,J11
- 25 March 2020
-
Economic Bulletin - BoxEconomic Bulletin Issue 2, 2020Details
- Abstract:
- The US corporate tax reform that entered into force at the beginning of 2018 resulted in foreign direct investment flows reversing for the first time in the euro area. The episode is explained fully by developments in countries which are financial centres, where disinvestment operations were carried out via special purpose entities, initially through transactions in equities and later also in debt securities. Besides the bilateral flows with the United States, which were the first to be affected, foreign direct investment flows to and from offshore centres also reversed, reflecting the complex geographical structure of capital allocation by US multinational enterprises.
- JEL Code:
- F32,F38
- 24 March 2020
-
Weekly financial statementAnnexes
- 24 March 2020
-
Weekly financial statement - Commentary
- 24 March 2020
-
Working Paper Series - Issue No. 2381Details
- Abstract:
- We propose an empirical framework to measure the degree of weakness of the global economy in real-time. It relies on nonlinear factor models designed to infer recessionary episodes of heterogeneous deepness, and fitted to the largest advanced economies (U.S., Euro Area, Japan, U.K., Canada and Australia) and emerging markets (China, India, Russia, Brazil, Mexico and South Africa). Based on such inferences, we construct a Global Weakness Index that has three main features. First, it can be updated as soon as new regional data is released, as we show by measuring the economic effects of coronavirus. Second, it provides a consistent narrative of the main regional contributors of world economy's weakness. Third, it allows to perform robust risk assessments based on the probability that the level of global weakness would exceed a certain threshold of interest in every period of time.
- JEL Code:
- E32,C22,E27
- 24 March 2020
-
Economic Bulletin - ArticleEconomic Bulletin Issue 2, 2020Details
- Abstract:
- This article analyses how the operations of large multinational enterprises (MNEs) affect the external account of the euro area and, in general, financial centres. The increased ease of moving intangible assets, profits and headquarters across borders poses challenges to the current framework of international statistics and economic analysis. First, the article shows how MNE operations are recorded in cross-border statistics, as well as the challenges in measuring such data. Second, the article highlights evidence of the impact that MNEs have on the external account of the euro area – this is most evident in current account balances and foreign direct investment in euro area financial centres, often involving special-purpose entities (SPEs). Third, the article looks at the tendency of financial centres to report current account surpluses that may be tentatively attributed, in part, to the activity of MNEs. Multilateral initiatives could help to improve the transparency of MNE operations and ensure an exchange of information across borders for tax and statistical purposes.
- JEL Code:
- F21,F23,F3
- 23 March 2020
-
Economic Bulletin - BoxEconomic Bulletin Issue 2, 2020Details
- Abstract:
- This box presents a simple indicator for US real economic activity based on the textual analysis of newspaper articles. The indicator correlates well with US contractions and NBER recession dates. In order to formally assess the predictive information content of the index, it is included in a regression framework in which US recessions are forecast. Results suggest that the index has good forecasting properties, outperforming a standard yield curve model at short horizons (up to eight months ahead). The text analysis index also improves the forecasting performance of standard yield curve models at longer horizons. Taken together, these results suggest that the index is useful for monitoring and predicting economic developments, particularly over short horizons. This approach also has the advantage of being easily updatable (on a daily basis) and applicable to different countries.
- JEL Code:
- C1,C25,E32,E37
- 23 March 2020
-
Economic Bulletin - ArticleEconomic Bulletin Issue 2, 2020Details
- Abstract:
- This article provides a comprehensive overview of progress with the deepening of Europe’s Economic and Monetary Union (EMU). The start of a new legislative period for the European Union (2019-24) is a natural and opportune moment to take stock of progress towards completion of the architecture of EMU. The agenda that was proposed in the 2015 Five Presidents’ Report has yet to be fully implemented, with outstanding measures in the financial, fiscal, economic and political domains. This article surveys those various domains, looking at the elements that have been completed, those that are still ongoing, and those that are desirable but not yet under way. It then identifies priorities in terms of completing the banking union, deepening the integration of Europe’s capital markets, improving the euro area’s fiscal architecture and increasing the resilience of national economic structures.
- JEL Code:
- E61,E63,F55,G28
- 21 March 2020
-
InterviewDetails
- Subtitle:
- Interview with Isabel Schnabel, Member of the Executive Board of the ECB, conducted by Patrick Bernau and Dennis Kremer
- 20 March 2020
-
InterviewDetails
- Subtitle:
- Interview with Luis de Guindos, Vice-President of the ECB, conducted by Carlos Franganillo on 19 March 2020
- 20 March 2020
- 20 March 2020
-
Working Paper Series - Issue No. 2380Details
- Abstract:
- This paper studies optimal financial policy in a world where the financial sector can become excessively optimistic. I decompose the welfare effects of bank capital regulation to demonstrate the effects of exuberance and its interaction with incentive problems in banking. The optimal policy depends not only on the extent, but also on the type of optimism. For example, it is markedly different when the exuberance of banks focuses on neglected downside risk, as opposed to overstated upside opportunities. A central normative conclusion is that “leaning against the wind”, by tightening capital requirements in exuberant times, can be counterproductive. I show that two natural metrics, describing the distortion in perceived upside and downside risk, are sufficient statistics for the policy implications of exuberance. My results shed light on the diverse empirical evidence on the relationship between bank capital and risk-taking. Finally, I investigate the sensitivity of these insights under different assumptions about government rationality and paternalism.
- JEL Code:
- G01,G21,G40
- Network:
- ECB Lamfalussy Fellowship Programme
- 20 March 2020
-
Statistics Paper Series - Issue No. 34Details
- Abstract:
- The quality of the geographical breakdown in the balance of payments and related statistics (such as international trade in goods, trade in services and foreign direct investment (FDI) statistics) can be assessed by means of comparisons with mirror data in order to assess bilateral asymmetries. Although such comparisons are performed on a regular basis, they tend to focus on pairs of countries and are not sufficient to determine which of the countries involved has better data. This paper describes three synthetic indicators that have been developed with a view to assessing whole groups of countries. In the specific context of an economic union’s external account, they allow us to assess the quality of geographical breakdowns by country and the contribution that an individual country makes to the aggregate asymmetry for that group of countries. Those indicators are applied in the context of euro area FDI statistics.
- JEL Code:
- C82,E01,F21,F23
- 20 March 2020
- 20 March 2020
-
Balance of payments (monthly)
- 19 March 2020
-
The ECB BlogDetails
- Subtitle:
- We are committed to playing our role in supporting every citizen of the euro area through this extremely challenging time, President Christine Lagarde writes in The ECB Blog. Our temporary pandemic emergency purchase programme is designed to address the unprecedented situation our monetary union faces.
- 19 March 2020
-
InterviewDetails
- Subtitle:
- Interview with Fabio Panetta, Member of the Executive Board of the ECB, conducted by Gennaro Pellino on 19 March 2020
- 18 March 2020
-
Monetary policy decision
- 18 March 2020
-
InterviewDetails
- Subtitle:
- Interview with Luis de Guindos, Vice-President of the ECB, conducted by Iñigo Alfonso on 18 March 2020
- 18 March 2020
-
InterviewDetails
- Subtitle:
- Interview with Isabel Schnabel, Member of the Executive Board of the ECB, conducted by Lisa Nienhaus on 16 March 2020 and published on 18 March 2020
- 18 March 2020
-
Press release
- 17 March 2020
-
Weekly financial statementAnnexes
- 17 March 2020
-
Weekly financial statement - Commentary
- 15 March 2020
- 15 March 2020
-
InterviewDetails
- Subtitle:
- Interview with Fabio Panetta, Member of the Executive Board of the ECB, conducted by Daniele Manca on 14 March 2020 and published on 15 March 2020
- 13 March 2020
- 13 March 2020
-
Governing Council decisions - Other decisions
- 13 March 2020
- 13 March 2020
-
The ECB BlogDetails
- Subtitle:
- We will not tolerate any risks to the smooth transmission of our monetary policy in all jurisdictions of the euro area, Executive Board member Philip R. Lane writes in the inaugural post of The ECB Blog. The post explains the analytical framework underlying the March monetary policy measures.
- 12 March 2020
- 12 March 2020
- 12 March 2020
- 12 March 2020
-
Macroeconomic projections for the euro areaAnnexes
- 12 March 2020
- 12 March 2020
-
Monetary policy statementDetails
- Subtitle:
- Christine Lagarde, President of the ECB,Luis de Guindos, Vice-President of the ECB,Frankfurt am Main, 12 March 2020
- 12 March 2020
- 12 March 2020
-
Monetary policy decision
- 11 March 2020
-
Euro area securities issues statistics
- 10 March 2020
-
Weekly financial statementAnnexes
- 10 March 2020
-
Weekly financial statement - Commentary
- 9 March 2020
-
Press release
- 4 March 2020
-
Working Paper Series - Issue No. 2379Details
- Abstract:
- This paper is linked to two debates on fiscal policies: first, the implications of low interest-growth differentials for debt sustainability and, second, the reform of the EU fiscal governance framework. In both debates the choice of government debt anchor and the speed of adjustment take centre stage. The Stability and Growth Pact's debt rule appears predestined to fulfil the role of debt anchor. However, our analysis shows that its existing design gives rise to a pro-cyclical bias that has hampered its implementation in the low-growth low-inflation environment. We propose two parametric changes to better balance the objectives of macroeconomic stabilisation and debt sustainability: first, accounting for persistent deviations of inflation from the central bank's objective; and, second, a reduced speed of adjustment. Putting a reformed debt rule at the centre of the EU fiscal governance framework would allow reducing the latter's complexity without the need to revise the EU Treaties.
- JEL Code:
- E62,F42,H61,H62,H63,H87
- 4 March 2020
- 4 March 2020
-
MFI interest rate statistics
- 3 March 2020
-
Weekly financial statementAnnexes
- 3 March 2020
-
Weekly financial statement - Commentary
- 3 March 2020
-
InterviewDetails
- Subtitle:
- Contribution by Luis de Guindos, Vice-President of the ECB, on the occasion of the publication of the ECB report on “Financial integration and structure in the euro area”, Frankfurt
- 3 March 2020
-
Euro area insurance corporations statistics
- 3 March 2020
-
Financial integration and structure in the euro area - Issue No. 2020Annexes
- 3 March 2020
-
- Issue No. 2018
Related- 3 March 2020
- 3 March 2020
-
Press releaseRelated
- 3 March 2020
-
Financial integration and structure in the euro area - Issue No. 2020
- 3 March 2020
-
Financial integration and structure articleFinancial Integration and Structure in the Euro Area 2020Details
- Abstract:
- This special feature analyses euro area investment preferences in the investment fund sector and discusses the implications for financial integration. We investigate the traditional perception that investors tend to hold a disproportionate share of domestic assets in their portfolio, a phenomenon generally known as “home bias”. We argue that measures of home bias that neglect fund holders’ countries of origin are biased, in particular when investments are concentrated in financial centres. By taking into account fund holders’ country of origin rather than assuming the fund’s domicile as investment origin, this study revisits and corrects measures of home bias in the euro area.
- 3 March 2020
-
Financial integration and structure articleFinancial Integration and Structure in the Euro Area 2020Details
- Abstract:
- This special feature discusses how a common sovereign safe asset in the euro area could benefit financial stability by fostering financial integration and development, and by changing the structure of asset markets. The discussion focuses on the potential benefits of a well-designed common safe asset that has certain desirable characteristics, while it does not provide an assessment of specific design options. This special feature should be viewed as part of a broader discussion on how to complete the banking union, which also includes considerations regarding a European deposit insurance scheme and changing the regulatory treatment of sovereign exposures.
- 3 March 2020
-
Financial integration and structure articleFinancial Integration and Structure in the Euro Area 2020Details
- Abstract:
- Brexit will result in a substantial structural change to the EU’s financial architecture over the coming years. It could be particularly significant for derivatives clearing, investment banking activities and securities and derivatives trading as the reliance on service provision by UK financial firms is more pronounced in these areas and the provision of such services is currently linked to the EU passporting regime. At the same time, the precise overall impact of Brexit on the EU’s future financial architecture in general – and on these specific areas in particular – is difficult to predict at this stage, and may change over time. This special feature makes a first attempt at analysing some of the factors that may affect the EU’s financial architecture post-Brexit. It focuses on areas which currently show strong reliance on the UK and are of particular relevance for the ECB under its various mandates.
- 2 March 2020
-
Press release
- 2 March 2020
-
SpeechDetails
- Subtitle:
- Remarks by Luis de Guindos, Vice-President of the ECB, at the European Economics and Financial Centre
- 28 February 2020
-
€STR Transparency on errors
- 28 February 2020
-
Research Bulletin - Issue No. 67Details
- Abstract:
- With monetary policy constrained by the effective lower bound (ELB), the debt sustainability implications of a fiscal expansion are a pressing concern. In a general equilibrium model of fiscal limits, we find that the adverse impact of a fiscal expansion on sustainability is muted at the ELB compared with normal times. Getting the timing of public spending increases right, however, is essential for containing sustainability risks.
- JEL Code:
- E52,E61,E63
- 27 February 2020
-
SpeechDetails
- Subtitle:
- Dinner remarks by Philip R. Lane, Member of the Executive Board of the ECB, at the Centre for European Reform
- 27 February 2020
- 27 February 2020
- 27 February 2020
-
SpeechDetails
- Subtitle:
- Speech by Isabel Schnabel, Member of the Executive Board of the ECB, at the Barclays International Monetary Policy Forum
- 27 February 2020
-
SpeechDetails
- Subtitle:
- Speech by Christine Lagarde, President of the ECB, at the launch of the COP 26 Private Finance Agenda
- 27 February 2020
-
SpeechDetails
- Subtitle:
- Introductory remarks by Fabio Panetta, Member of the Executive Board of the ECB, at the fourth meeting of the Euro Cyber Resilience Board for pan-European Financial Infrastructures
- 27 February 2020
-
Monetary developments in the euro areaAnnexes
- 27 February 2020
-
Monetary developments in the euro area
- 26 February 2020
-
SpeechDetails
- Subtitle:
- Introductory remarks by Fabio Panetta, Member of the Executive Board of the ECB, at the Second Joint Bundesbank/ECB/Federal Reserve Bank of Chicago Conference on CCP Risk Management
- 25 February 2020
-
Weekly financial statementAnnexes
- 25 February 2020
-
Weekly financial statement - Commentary
- 25 February 2020
-
Working Paper Series - Issue No. 2378Details
- Abstract:
- Density forecast combinations are examined in real-time using the log score to compare five methods: fixed weights, static and dynamic prediction pools, as well as Bayesian and dynamic model averaging. Since real-time data involves one vintage per time period and are subject to revisions, the chosen actuals for such comparisons typically differ from the information that can be used to compute model weights. The terms observation lag and information lag are introduced to clarify the different time shifts involved for these computations and we discuss how they influence the combination methods. We also introduce upper and lower bounds for the density forecasts, allowing us to benchmark the combination methods. The empirical study employs three DSGE models and two BVARs, where the former are variants of the Smets and Wouters model and the latter are benchmarks. The models are estimated on real-time euro area data and the forecasts cover 2001–2014, focusing on inflation and output growth. We find that some combinations are superior to the individual models for the joint and the output forecasts, mainly due to over-confident forecasts of the BVARs during the Great Recession. Combinations with limited weight variation over time and with positive weights on all models provide better forecasts than those with greater weight variation. For the inflation forecasts, the DSGE models are better overall than the BVARs and the combination methods.
- JEL Code:
- C11,C32,C52,C53,E37
- 24 February 2020
- 24 February 2020
- 24 February 2020
-
Survey of Monetary Analysts
- 21 February 2020
-
SpeechDetails
- Subtitle:
- Keynote speech by Philip R. Lane, Member of the Executive Board of the ECB, at the 2020 US Monetary Policy Forum
- 21 February 2020
-
Governing Council decisions - Other decisions
- 20 February 2020
-
Monetary policy account
- 20 February 2020
-
Press release
- 20 February 2020
-
Annual consolidated balance sheet of the EurosystemAnnexes
- 22 June 2020
-
Commentary to the consolidated balance sheet of the Eurosystem
- 20 February 2020
- 20 February 2020
-
SpeechDetails
- Subtitle:
- Remarks by Luis de Guindos, Vice-President of the ECB, at the European Banking Federation Committee meeting
- 20 February 2020
-
Working Paper Series - Issue No. 2377Details
- Abstract:
- The response of major central banks to the global financial crisis has revived the debate around the interactions between monetary policy (MP) and bank stability. This technical paper sheds light, quantitatively, on the different mechanisms underlying the relationship between MP and bank stability. It does so by reviewing microeconometric studies from the academic literature as well as those conducted internally at the ECB. The paper proceeds chronologically, using the recent crisis as a touchstone. First, it provides a brief overview of the main theoretical channels linking bank stability and the transmission of MP. It then analyses the evidence from the pre-crisis period in the light of the structural trends leading up to the crisis. As the crisis erupted, unconventional monetary policy (UMP) measures were deployed, and the paper suggests that these were essential to buttress bank stability and halt a systemic crisis. At the same time, these measures involved trade-offs, and the adverse spillovers on banks’ intermediation capacity and risk-taking require close monitoring. The paper ends by offering a critical review of the methodologies employed and suggestions for the areas where analytical efforts should be focussed in the future.
- JEL Code:
- E4,E43,E5,E52,G20,G21
- Network:
- N/A
- 20 February 2020
-
Working Paper Series - Issue No. 2376Details
- Abstract:
- This paper examines the interactions of macroprudential and monetary policies. We find, using a range of macroeconomic models used at the European Central Bank, that in the long run, a 1% bank capital requirement increase has a small impact on GDP. In the short run, GDP declines by 0.15-0.35%. Under a stronger monetary policy reaction, the impact falls to 0.05-0.25%. The paper also examines how capital requirements and the conduct of macroprudential policy affect the monetary transmission mechanism. Higher bank leverage increases the economy's vulnerability to shocks but also monetary policy's ability to offset them. Macroprudential policy diminishes the frequency and severity of financial crises thus eliminating the need for extremely low interest rates. Countercyclical capital measures reduce the neutral real interest rate in normal times.
- JEL Code:
- E4,E43,E5,E52,G20,G21
- Network:
- N/A
- 20 February 2020
-
Statistics Paper Series - Issue No. 33Details
- Abstract:
- Since the financial crisis, central bank policymakers have expressed a need for more integrated microdata for monetary policy purposes and for macroprudential and microprudential supervision, with a stronger focus on lending. In response to this policy need, the European System of Central Banks (ESCB) has increased the scope and quality of instrument-level data (e.g. loan-by-loan) it collects. At the same time, the ESCB has further developed the Register of Institutions and Affiliates Data (RIAD), which is pivotal in ensuring the successful linking of the databases, because it ensures the unique identification of counterparties. RIAD allows data to be aggregated using various types of company information, such as industrial activity or geographical location, but it also offers the possibility of aggregating data according to multiple group structures based on different concepts of what a “group” is. This paper discusses why there is a policy need for microdata and highlights some of the practical uses of the interlinked data. It also sheds more light on how information contained in different granular databases can be combined and aggregated in a flexible manner according to different business needs. It describes in detail the process of linking through a common stable identifier, points out current limitations and suggests a possible way forward.
- JEL Code:
- C81,E44,G32
- 20 February 2020
-
Euro area investment fund statistics
- 20 February 2020
-
Euro area financial vehicle corporation statistics
- 19 February 2020
-
Other publicationRelated
- 19 February 2020
- 19 February 2020
-
Press releaseRelated
- 19 February 2020
- 19 February 2020
-
Working Paper Series - Issue No. 2375Details
- Abstract:
- Using micro data from the 2015 Dutch CentERpanel, we examine whether trust in the European Central Bank (ECB) influences individuals’ expectations and uncertainty about future inflation, and whether it anchors inflation expectations. We find that higher trust in the ECB lowers inflation expectations on average, and significantly reduces uncertainty about future inflation. Moreover, results from quantile regressions suggest that trusting the ECB increases (lowers) inflation expectations when the latter are below (above) the ECB’s inflation target. These findings hold after controlling for people’s knowledge about the objectives of the ECB.
- JEL Code:
- D12,D81,E03,E40,E58
- Network:
- Household Finance and Consumption Network (HFCN)
- 19 February 2020
-
Balance of payments (monthly)
- 18 February 2020
-
Weekly financial statementAnnexes
- 18 February 2020
-
Weekly financial statement - Commentary
- 18 February 2020
-
SpeechDetails
- Subtitle:
- Introductory remarks by Fabio Panetta, Member of the Executive Board of the ECB, at the European Parliamentary Week
- 18 February 2020
-
Working Paper Series - Issue No. 2374Details
- Abstract:
- This study documents significant differences in the interbank market lending and borrowing levels across countries. We argue that the existing differences in interbank market usage can be explained by the trust of the market participants in the stability of the country’s banking sector and counterparties, proxied by the history of banking crises and failures. Specifically, banks originating from a country that has lower level of trust tend to have lower interbank borrowing. Using a proprietary dataset on bilateral exposures, we investigate the Euro Area interbank network and find the effect of trust relies on the network structure of interbank markets. Core banks acting as interbank intermediaries in the network are more significantly influenced by trust in obtaining interbank funding, while being more exposed in a community can mitigate the negative effect of low trust. Country-level institutional factors might partially substitute for the limited trust and enhance interbank activity.
- JEL Code:
- G01,G21,G28,D85
- 18 February 2020
-
Working Paper Series - Issue No. 2373Details
- Abstract:
- We develop an agent-based model of traditional banks and asset managers to investigate the contagion risk related to fire sales and balance sheet interactions. We take a structural approach to the price formation in fire sales as in Bluhm et al. (2014) and introduce a market clearing mechanism with endogenous formation of asset prices. We find that, first, banks which are active in both the interbank and securities markets may channel financial distress between the two markets. Second, while higher bank capital requirements decrease default risk and funding costs, they make it also more profitable to invest into less-liquid assets financed by interbank borrowing. Third, asset managers absorb small liquidity shocks, but they exacerbate contagion when their voluntary liquid buffers are fully utilised. Fourth, a system with larger and more interconnected agents is more prone to contagion risk stemming from funding shocks.
- JEL Code:
- C6,G21,G23
- 18 February 2020
-
Euro money market statistics
- 17 February 2020
-
SpeechDetails
- Subtitle:
- Keynote speech by Philip R. Lane, Member of the Executive Board of the ECB, at the Joint European Central Bank, Irving Fisher Committee and Banco de Portugal conference on “Bridging measurement challenges and analytical needs of external statistics: evolution or revolution?”
- 14 February 2020
-
InterviewDetails
- Subtitle:
- Interview with Philip R. Lane, Member of the Executive Board of the ECB, conducted by Robert Shortt on 13 February 2020 and broadcast (in part) on 13 February 2020
- 12 February 2020
- 12 February 2020
-
Euro area securities issues statistics
- 11 February 2020
-
InterviewDetails
- Subtitle:
- Interview with Isabel Schnabel, Member of the Executive Board of the ECB, conducted by Anja Ettel and Holger Zschäpitz on 10 February 2020, published on 11 February 2020
- 11 February 2020
-
SpeechDetails
- Subtitle:
- Keynote speech by Philip R. Lane, Member of the Executive Board of the ECB, at the financial markets workshop of the Economic Council (Finanzmarktklausur des Wirtschaftsrats der CDU)
- 11 February 2020
-
SpeechDetails
- Subtitle:
- Speech by Isabel Schnabel, Member of the Executive Board of the ECB, at the Juristische Studiengesellschaft
Annexes- 11 February 2020
-
Speech
- 11 February 2020
-
SpeechDetails
- Subtitle:
- Introductory statement by Christine Lagarde, President of the ECB, on the occasion of the presentation of the ECB Annual Report 2018 at the European Parliament
Annexes- 11 February 2020
- 11 February 2020
-
Weekly financial statementAnnexes
- 11 February 2020
-
Weekly financial statement - Commentary
- 11 February 2020
-
Occasional Paper Series - Issue No. 238Details
- Abstract:
- We explain how the external counterpart of the euro area M3 can be analysed by using the euro area balance of payments (b.o.p.). This is possible because the net external assets of the monetary financial institutions (MFIs) are present in two statistical frameworks that follow similar conventions: the balance sheet items (BSI) of MFIs and the balance of payments statistics. The first step to including external flows in the monetary analysis is to understand the nature of the flows between resident money holders and the rest of the world. This is possible thanks to the monetary presentation of the b.o.p, which provides information on the nature of external transactions and therefore guidance on the persistence of the monetary signal stemming from external flows.Over the past five years, the increase in the euro area’s external competitiveness has given rise to a sustained current account surplus that has consistently supported monetary inflows into the euro area. At the same time, portfolio transactions, which closely reflect financial and monetary policy conditions, have fluctuated significantly, increasing monetary inflows in the period from mid-2012 to mid-2014 and turning them into net outflows during the asset purchase programme (APP) period.
- JEL Code:
- E51,E52,F45,F41,F43,F32,F34
- 11 February 2020
-
Survey on credit terms and conditions in euro-denominated securities financing and OTC derivatives marketsAnnexes
- 11 February 2020
-
Other publication
- 11 February 2020
-
Other publication
- 11 February 2020
- 10 February 2020
- 10 February 2020
-
InterviewDetails
- Subtitle:
- Interview with Luis de Guindos, Vice-President of the ECB, conducted by Andrés Stumpf on 6 February 2020 and published on 10 February 2020
- 6 February 2020
-
Economic Bulletin
- 6 February 2020
-
Economic Bulletin - BoxEconomic Bulletin Issue 1, 2020Details
- Abstract:
- Survey evidence suggests a further deterioration in the euro area outlook for manufacturing investment in the near term. Country and sectoral-level survey results point to the German manufacturing sector as the key driver behind the waning outlook for investment. Business investment in R&D is also expected to remain subdued.
- JEL Code:
- E0,E22
- 6 February 2020
-
Economic Bulletin - BoxEconomic Bulletin Issue 1, 2020Details
- Abstract:
- The analysis provides empirical evidence that repo market liquidity is an important determinant of bond market liquidity and arbitrage opportunities in swap markets. The first part of the analysis is concerned with the role of repo market liquidity in funding bonds used as collateral in repo transactions. It explores whether tense repo markets reduce the liquidity in bond markets. The second part examines how lower liquidity in repo markets hampers arbitrage in swap markets. The results presented show that repo markets support both bond market liquidity and swap market efficiency, highlighting their important role in financial markets.
- JEL Code:
- G21,G28
- 6 February 2020
-
Economic Bulletin - BoxEconomic Bulletin Issue 1, 2020Details
- Abstract:
- The inversion of the US yield curve during the summer of 2019 increased speculation about the possibility of a US recession. However, standard yield curve-based recession probability models ignore factors such as the impact of quantitative easing measures that can distort the signals derived from the current yield curve. This box presents alternative models to deal with these possible distortions. In particular, measures of the term spread that account for asset purchases in the United States, spillovers from euro area purchases to US yields and the effect of foreign official reserve holdings on long-term US yields are constructed. US recession probability models that account for asset purchases predict significantly lower recession probabilities than those implied by standard yield curve models, pointing to a somewhat more benign outlook for the US economy.
- JEL Code:
- E32,E44,E47,G17
- 6 February 2020
-
Economic Bulletin - BoxEconomic Bulletin Issue 1, 2020Details
- Abstract:
- Over the past year the global economy has transitioned from a robust and synchronised expansion to a widespread slowdown. Global growth has weakened on the back of soft investment, which was also a key driver of global trade’s sharp fall into contractionary territory in the first half of 2019 (see Chart A). The slowdown in global investment and trade has occurred in an environment of rising trade tensions between the United States and China, slowing Chinese demand, (geo-)political tensions, Brexit and idiosyncratic stresses in several emerging economies, with rising uncertainty magnifying the negative impact. Against this backdrop, this box assesses the role of uncertainty in the recent slowdown of global investment and trade.
- JEL Code:
- F21,F44,C54
- 6 February 2020
-
SpeechDetails
- Subtitle:
- Speech by Luis de Guindos, Vice-President of the ECB, at the XXVI Santander Iberian Conference
- 6 February 2020
-
SpeechDetails
- Subtitle:
- Introductory statement by Christine Lagarde, President of the ECB, at the ECON committee of the European Parliament
Annexes- 6 February 2020
-
Speech
- 5 February 2020
-
SpeechDetails
- Subtitle:
- Speech by Christine Lagarde, President of the ECB, at the "Grand Prix de l’Économie des Echos pour l’année 2019"
- 5 February 2020
-
SpeechDetails
- Subtitle:
- Presentation by Philip R. Lane, Member of the Executive Board of the ECB, at "Berliner Gespräch zum Finanzplatz Frankfurt" organised by Hessische Landesvertretung in Berlin, 5 February 2020
- 5 February 2020
-
Economic Bulletin - ArticleEconomic Bulletin Issue 1, 2020Details
- Abstract:
- This article focuses on household wealth in the euro area from a macroeconomic perspective. It describes developments in financial and non-financial wealth and their driving forces. The impact of wealth on private consumption is then discussed. It concludes with some monetary policy implications.
- JEL Code:
- E21,E52
- 5 February 2020
-
Economic Bulletin - BoxEconomic Bulletin Issue 1, 2020Details
- Abstract:
- Foreign trade zones (FTZs) are designed to promote economic development by favouring international trade, especially trade within global production networks. In FTZs, a substantial share of imports (ranging from 12-17% of total domestic imports) is manufactured and, in part, re-exported. FTZs can break the “chain effect” of tariffs because intermediate goods imported via FTZs enjoy preferential treatment or even duty exemption. This already occurs in the United States and is under consideration in China, where capital controls in FTZs are looser and tax advantages already exist. In the European Union, however, FTZs are mainly used to smooth out customs processes, while an import duty suspension scheme is used to grant favourable treatment to imports of intermediates.
- JEL Code:
- E23,F10,F13
- 4 February 2020
-
Weekly financial statementAnnexes
- 4 February 2020
-
Weekly financial statement - Commentary
- 4 February 2020
-
Working Paper Series - Issue No. 2372Details
- Abstract:
- We address the question of whether the heterogeneity in savings is partly due to differences in pension wealth across individuals and across countries, using a European harmonised wealth survey (HFCS) combined with estimates of pension wealth (OECD). First, we find significant displacement effects of mandatory pension wealth on non-pension financial wealth at the mean, and a statistically significant crowd-out estimate on the probability of owning real estate property. Second, there is heterogeneity in the mean savings offset depending on age, risk attitudes and country. Third, the offset follows different patterns along the non-pension wealth distribution across countries.
- JEL Code:
- D31,D91,H55
- Network:
- Household Finance and Consumption Network (HFCN)
- 4 February 2020
-
Working Paper Series - Issue No. 2371Details
- Abstract:
- In this paper, we consider whether differences in the forecast performance of ECB SPF respondents reflect ability or chance. Although differences in performance metrics sometimes appear substantial, it is challenging to determine whether they reflect ex ante skill or other factors impacting ex post sampling variation such as the nature of economic shocks that materialised or simply which rounds participants responded in. We apply and adapt an approach developed by D’Agostino et al. (2012) who used US SPF data. They developed a test of a null hypothesis that all forecasters have equal ability. Their statistic reflects both the absolute and relative performance of each forecaster and they used bootstrap techniques to compare the empirical results with the equivalents obtained under the null hypothesis of equal forecaster ability. Our results, at a first pass, suggest that there would appear to be evidence of good/bad forecasters. However once we control for the autocorrelation that is caused by the overlapping rolling horizons, we find, like D’Agostino et al. (2012), that the best forecasters are not statistically significantly better than others. Unlike D’Agostino et al. (2012), however, we do not find evidence of forecasters that perform very significantly worse than others. Controlling for autocorrelation is a key feature of this paper relative to previous work. Our results hold considering the whole sample period of the ECB SPF (1999-2018) as well as the pre- and post-global financial crisis samples. We also find that when assessed across all variables and horizons, the aggregate (consensus) SPF forecast performs best.
- JEL Code:
- C53,E27,E37
- 4 February 2020
-
MFI interest rate statistics
- 4 February 2020
-
Economic Bulletin - ArticleEconomic Bulletin Issue 1, 2020Details
- Abstract:
- Bank lending to euro area corporates has gradually recovered since 2014, supported by very favourable financing conditions. An assessment of this recovery indicates that it has been broadly in line with economic activity, although loan growth has remained below pre-crisis levels. The moderate pace of the recovery in loan growth mainly reflects the post-crisis deleveraging process and the growing relevance of alternative sources of financing, as well as somewhat weaker economic activity compared with the pre-crisis period. Nevertheless, evidence suggests that bank lending to non-financial corporations has supported firms’ business investment. The strength of the relationship between business investment and bank lending to corporates has, however, differed across euro area countries. Qualitative and quantitative evidence shows that the recovery in bank lending to corporates has received strong support from the ECB’s non-standard monetary policy measures.
- JEL Code:
- E4,E44,E5,E52
- 3 February 2020
-
InterviewDetails
- Subtitle:
- Interview with Luis de Guindos, Vice-President of the ECB, conducted by Rallou Alexopoulou on 3 February 2020 and broadcast (in part) on 3 February 2020
- 3 February 2020
-
T2S Harmonisation progress report - Issue No. 2020
- 3 February 2020
-
Working Paper Series - Issue No. 2370Details
- Abstract:
- Using the official micro price data underlying the U.K. consumer price index, we document a new stylized fact for the life-cycle behavior of consumer prices: relative to a narrowly defined set of competing products, the price of individual products tends to fall over the product lifetime. We show that this data feature has important implications for the optimal inflation target. Constructing a sticky-price model featuring a product life cycle and heterogeneous relative-price trends, we derive closed-form expressions for the optimal inflation target under Calvo and menu-cost frictions. We show how the optimal target can be estimated from the observed trends in relative prices. For the U.K. economy, we find the optimal target to be equal to 2.6% in 2016. It has steadily increased over the period 1996 to 2016 due to changes in relative price trends over this period.
- JEL Code:
- E31
- 3 February 2020
-
Working Paper Series - Issue No. 2369Details
- Abstract:
- In this paper we develop a general framework to analyze state space models with time-varying system matrices where time variation is driven by the score of the conditional likelihood. We derive a new filter that allows for the simultaneous estimation of the state vector and of the time-varying parameters. We use this method to study the time-varying relationship between the price dividend ratio, expected stock returns and expected dividend growth in the US since 1880. We find a significant increase in the long-run equilibrium value of the price dividend ratio over time, associated with a fall in the long-run expected rate of return on stocks. The latter can be attributed mainly to a decrease in the natural rate of interest, as the long-run risk premium has only slightly fallen.
- JEL Code:
- C22,C32,C51,C53,E31
- 3 February 2020
-
Economic Bulletin - BoxEconomic Bulletin Issue 1, 2020Details
- Abstract:
- This box reviews developments in non-euro area EU countries in central and eastern Europe with respect to trade integration and economic synchronisation with the euro area and investigates the potential exposure of their export dynamics to changing external conditions. The six economies are now an integral part of European production networks and net exports are a key driver of business cycle synchronisation with the euro area. In recent years, however, the business cycles of the six countries have somewhat decoupled from euro area economic activity. The potential drivers of this decoupling include robust domestic demand, lingering effects of past foreign direct investment in industry, the nature and final use of exports and the resilience of exports to countries outside the euro area. So far, the ongoing moderation in manufacturing, including in the automotive industry in Germany, and the escalation of trade tensions have been only partly reflected in the six economies.
- JEL Code:
- E32,F15
- 2 February 2020
-
InterviewDetails
- Subtitle:
- Interview with Philip R. Lane, Member of the Executive Board of the ECB, conducted by Martin Arnold on 27 January, and published on 2 February 2020
- 30 January 2020
-
Press releaseAnnexes
- 30 January 2020
- 30 January 2020
- 30 January 2020
-
Working Paper Series - Issue No. 2368Details
- Abstract:
- In a simplified theoretical framework we model the strategic interactions between OPEC and non-OPEC producers and the implications for the global oil market. Depending on market conditions, OPEC may find it optimal to act either as a monopolist on the residual demand curve, to move supply in-tandem with non-OPEC, or to offset changes in non-OPEC supply. We evaluate the implications of the model through a Structural Vector Auto Regression (VAR) that separates non-OPEC and OPEC production and allows OPEC to respond to supply increases in non-OPEC countries. This is done by either increasing production (Market Share Targeting) or by reducing it (Price Targeting). We find that Price Targeting shocks absorb half of the fluctuations in oil prices, which have left unexplained by a simpler model (where strategic interactions are not taken into account). Price Targeting shocks, ignored by previous studies, explain around 10 percent of oil price fluctuations and are particularly relevant in the commodity price boom of the 2000s. We confirm that the fall in oil prices at the end of 2014 was triggered by an attempt of OPEC to re-gain market shares. We also find the OPEC elasticity of supply three times as high as that of non-OPEC producers.
- JEL Code:
- Q41,Q43
- 29 January 2020
-
Monetary developments in the euro area
- 28 January 2020
- 28 January 2020
-
Weekly financial statementAnnexes
- 28 January 2020
-
Weekly financial statement - Commentary
- 28 January 2020
-
Euro area economic and financial developments by institutional sector (full)
- 28 January 2020
-
Research Bulletin - Issue No. 66Details
- Abstract:
- In June 2016, the ECB launched its corporate sector purchase programme, through which it purchased corporate bonds in an effort to improve the financing conditions of euro area firms. In this article, I argue that the programme was successful. In particular, by increasing prices and reducing yields in the targeted bond market segment, the programme encouraged investors to shift their investments towards similar but somewhat riskier bonds. This reduced borrowing costs for many firms, including those whose bonds were not eligible for direct purchase by the ECB.
- JEL Code:
- G15,G32,G38
- 27 January 2020
-
SpeechDetails
- Subtitle:
- Keynote speech by Yves Mersch, Member of the Executive Board of the ECB and Vice-Chair of the Supervisory Board of the ECB, at the celebration of INVESTAS’ 60th anniversary
- 24 January 2020
-
InterviewDetails
- Subtitle:
- Interview with Christine Lagarde, President of the ECB, conducted by Francine Lacqua and broadcast on 24 January
- 24 January 2020
-
InterviewDetails
- Subtitle:
- Interview with Christine Lagarde, President of the ECB, conducted by Jean-Paul Chapel
- 24 January 2020
-
Governing Council decisions - Other decisions
- 24 January 2020
- 24 January 2020
- 24 January 2020
- 24 January 2020
-
Working Paper Series - Issue No. 2367Details
- Abstract:
- We explore whether the transparency in banks’ lending activities enhances the harmonization of credit terms that a bank offers across its different geographic regions. We take advantage of a novel loan-level reporting initiative by the European Central Bank, which requires repo borrowing banks that pledge their asset-backed securities as collateral to disclose granular information on loan characteristics and performance. We find that loans originated under the transparency regime share more similar interest rate, loan-to-collateral-value ratio and maturity compared to same-purpose loans issued by the same bank in different regions. Underperforming regional branches and those with less easily accessible peer-branches experience greater convergence in their credit terms, suggesting that transparency facilitates learning across a bank’s different geographic regions. Additionally, banks that face stronger regulatory scrutiny are more likely to alleviate credit term disparities under the transparency regime. Overall, our findings suggest that transparency enhances the within-bank harmonization of lending practices.
- JEL Code:
- M41,G21,D83
- Network:
- ECB Lamfalussy Fellowship Programme
- 24 January 2020
-
Press releaseRelated
- 24 January 2020
-
Survey of Professional Forecasters
- 24 January 2020
-
Survey of Professional ForecastersAnnexes
- 24 January 2020
-
Survey of Professional Forecasters
Related- 24 January 2020
- 24 January 2020
- 23 January 2020
-
SpeechDetails
- Subtitle:
- Opening remarks by Christine Lagarde, President of the ECB, during a dinner on "Uniting Europe" at the World Economic Forum
- 23 January 2020
-
Press release
- 23 January 2020
-
Monetary policy statementDetails
- Subtitle:
- Christine Lagarde, President of the ECB,Luis de Guindos, Vice-President of the ECB,Frankfurt am Main, 23 January 2020
- 23 January 2020
-
Monetary policy decision
- 21 January 2020
-
Weekly financial statementAnnexes
- 21 January 2020
-
Weekly financial statement - Commentary
- 21 January 2020
- 21 January 2020
-
Euro area bank lending survey - Issue No. 2019Annexes
- 21 January 2020
-
Euro area bank lending survey - Annex
Related- 21 January 2020
-
Press release
- 21 January 2020
-
Press releaseRelated
- 21 January 2020
-
Euro area bank lending survey - Issue No. 2019
- 17 January 2020
-
Balance of payments (monthly)
- 16 January 2020
-
Monetary policy account
- 16 January 2020
-
SpeechDetails
- Subtitle:
- Speech by Christine Lagarde, President of the ECB, at the New Year’s Reception of the City of Frankfurt, 16 January 2020
- 15 January 2020
-
Working Paper Series - Issue No. 2366Details
- Abstract:
- Sovereign debt crises are difficult to solve. This paper studies the “holdout problem”, meaning the risk that creditors refuse to participate in a debt restructuring. We document a large variation in holdout rates, based on a comprehensive new dataset of 23 bond restructurings with external creditors since 1994. We then study the determinants of holdouts and find that the size of creditor losses (haircuts) is among the best predictors at the bond level. In a restructuring, bonds with higher haircuts see higher holdout rates, and the same is true for small bonds and those issued under foreign law. Collective action clauses (CACs) are effective in reducing holdout risks. However, classic CACs, with bond-by-bond voting, are not sufficient to assure high participation rates. Only the strongest form of CACs, with single-limb aggregate voting, minimizes the holdout problem according to our simulations. The results help to inform theory as well as current policy initiatives on reforming sovereign bond markets.
- JEL Code:
- F34,G15,H63,K22
- 14 January 2020
-
Weekly financial statementAnnexes
- 14 January 2020
-
Weekly financial statement - Commentary
- 14 January 2020
-
Working Paper Series - Issue No. 2365Details
- Abstract:
- Extending the data set used in Beyer (2009) from 2007 to 2017, we estimate I(1) and I(2) money demand models for euro area M3. We find that the elasticities in the money demand and the real wealth relations identified previously in Beyer (2009) have remained remarkably stable throughout the extended sample period, once only a few additional deterministic variables in the long run relationships for the period after the start of the global financial crisis and the ECB’s non- standard monetary policy measures are included. Testing for price homogeneity in the I(2) model we find that the nominal-to-real transformation is not rejected for the money relation whereas the wealth relation cannot be expressed in real terms.
- JEL Code:
- E41,C32,C22
- 14 January 2020
-
Working Paper Series - Issue No. 2364Details
- Abstract:
- We assess the impact of the Eurosystem’s Targeted Long-Term Refinancing Operations (TLTROs) on the lending policies of euro area banks. We first build a theoretical model in which banks compete in the credit and deposit markets. We distinguish between direct and indirect effects. Direct effects take place because bidding banks expand their loan supply due to the lower marginal costs implied by the TLTROs. Indirect effects on non-bidders operate via changes in the competitive environment in banks’ credit and deposit markets. We then test these predictions with a sample of 130 banks from 13 countries focusing on the first TLTRO series. Regarding direct effects, we find an easing impact on margins on loans to relatively safe borrowers, but no impact on credit standards. Regarding indirect effects, there is a positive impact on the loan supply on non-bidders which operates via an easing of credit standards.
- JEL Code:
- G21,E52,E58
- 14 January 2020
-
Euro area economic and financial developments by institutional sector (early)
- 13 January 2020
-
Working Paper Series - Issue No. 2363Details
- Abstract:
- Why do long-run interest rates respond to central bank communication? Whereas existing explanations imply a common set of signals drives short and long-run yields, we show that news on economic uncertainty can have increasingly large effects along the yield curve. To evaluate this channel, we use the publication of the Bank of England’s Inflation Report, from which we measure a set of high-dimensional signals. The signals that drive long-run interest rates do not affect short-run rates and operate primarily through the term premium. This suggests communication plays an important role in shaping perceptions of long-run uncertainty.
- JEL Code:
- E52,E58,C55
- Network:
- ECB Lamfalussy Fellowship Programme
- 13 January 2020
-
Working Paper Series - Issue No. 2362Details
- Abstract:
- How long does it take for exchange rate changes to pass through into inflation? Does it make a difference whether the exchange rate depreciates or appreciates? Do relatively large exchange rate changes entail more exchange rate pass-through? In this paper, we examine possible non-linearities in the transmission of exchange rate movements to import and consumer prices in all 19 euro area countries as well as the euro area as a whole from 1997 to 2019Q1. We extend a standard single-equation linear framework with additional interaction terms to account for possible non-linearities and apply local projections to obtain state-dependent impulse response functions. We find that (i) euro area consumer and import prices respond significantly to exchange rate movements after one year, responding more when the exchange rate change is relatively large; and (ii) euro appreciations and depreciations affect the level of euro area exchange rate pass-through in a symmetric fashion; (iii) for euro area countries results differ for import and consumer prices and across countries.
- JEL Code:
- E31,F41
- 13 January 2020
-
Euro area securities issues statistics
- 10 January 2020
-
Working Paper Series - Issue No. 2361Details
- Abstract:
- This paper uses a unique dataset where credit rejections experienced by euro area firms are matched with firm and bank characteristics. This allows us to study simultaneously the role that bank and firm weakness had in the credit reduction observed in the euro area during the sovereign debt crisis, and in credit developments characterising the post-crisis recovery. Compared with the existing literature matching borrowers’ and lenders’ characteristics, our dataset provides a better representation of euro area firms of small and medium size. Our findings suggest that, while firm balance sheet factors have been strong determinants of credit rejections, in the crisis period bank weakness made it harder to obtain external finance for firms located in stressed countries of the euro area.
- JEL Code:
- E44,F36,G01,G21
- 10 January 2020
-
Working Paper Series - Issue No. 2360Details
- Abstract:
- Quantifying the effects of trade policy in the age of ’global value chains’ (GVCs) requires an enhanced analytical framework that takes the observed international input-output relations in due account. However, existing quantitative general equilibrium models generally assume that industry-level bilateral final and intermediate trade shares are identical, and that the allocation of imported inputs across sectors is the same as the allocation of domestic inputs. This amounts to applying two proportionality assumptions, one at the border to split final goods and inputs, and another behind the border to allocate inputs across industries. In practice, neither assumption holds in available input-output data sets. To overcome this limitation of existing models, we consider a richer input-output structure across countries and sectors that we can match with the actual structure reported in input-output tables. This allows us to investigate the relation between the effects of changes in trade policies and GVCs. When we apply the enhanced quantitative general equilibrium model to the assessment of the effects of Brexit, we find trade and welfare losses that are substantially larger than those obtained by previous models. This is due to the close integration of UK-EU production networks and implies that denser GVCs amplify the adverse effects of protectionist trade policies.
- JEL Code:
- F13,F15,F40,F60
- 10 January 2020
-
Euro money market statistics
- 10 January 2020
-
Balance of payments (quarterly)
- 9 January 2020
-
SpeechDetails
- Subtitle:
- Vortrag von Isabel Schnabel, Mitglied des Direktoriums der EZB, beim Rotary Club Mainz-Rheinhessen, Mainz
- 9 January 2020
-
SpeechDetails
- Subtitle:
- Presentation by Philip R. Lane, Member of the Executive Board of the ECB, at the Bank of England Workshop on "The Future of Inflation Targeting" in London, 9 January 2020
- 9 January 2020
-
Working Paper Series - Issue No. 2359Details
- Abstract:
- We model economic policy uncertainty (EPU) in the four largest euro area countries by applying machine learning techniques to news articles. The unsupervised machine learning algorithm used makes it possible to retrieve the individual components of overall EPU endogenously for a wide range of languages. The uncertainty indices computed from January 2000 to May 2019 capture episodes of regulatory change, trade tensions and financial stress. In an evaluation exercise, we use a structural vector autoregression model to study the relationship between different sources of uncertainty and investment in machinery and equipment as a proxy for business investment. We document strong heterogeneity and asymmetries in the relationship between investment and uncertainty across and within countries. For example, while investment in France, Italy and Spain reacts strongly to political uncertainty shocks, in Germany investment is more sensitive to trade uncertainty shocks.
- JEL Code:
- C80,D80,E22,E66,G18,G31
- 9 January 2020
-
Working Paper Series - Issue No. 2358Details
- Abstract:
- In this paper we evaluate the predictive power of the three most popular equilibrium exchange rate concepts: Purchasing Power Parity (PPP), Behavioral Equilibrium Exchange Rate (BEER) and the Macroeconomic Balance (MB) approach. We show that there is a clear trade-off between storytelling and forecast accuracy. The PPP model offers little economic insights, but has good predictive power. The BEER framework, which links exchange rates to fundamentals, does not deliver forecasts of better quality than PPP. The MB approach has the most appealing economic interpretation, but performs poorly in forecasting terms. Sensitivity analysis confirms that changing the composition of fundamentals in the BEER model or modifying key underlying assumptions in the MB model does not generally enhance their predictive power.
- JEL Code:
- C33,F31,F37,F41
- 8 January 2020
-
InterviewDetails
- Subtitle:
- Interview with Christine Lagarde, President of the ECB, by Pierre-Henri de Menthon and Sabine Syfuss-Arnaud
- 8 January 2020
-
Weekly financial statementAnnexes
- 8 January 2020
-
Weekly financial statement - Commentary
- 8 January 2020
-
SpeechDetails
- Subtitle:
- Speech by Luis de Guindos, Vice-President of the ECB, at the SUERF/De Nederlandsche Bank Conference “Forging a new future between the UK and the EU”,
- 8 January 2020
-
Working Paper Series - Issue No. 2357Details
- Abstract:
- This paper studies the heterogeneity of the marginal propensity to consume out of wealth (MPC) both across and within countries. We estimate the MPC based on a cross-country harmonized household level dataset which combines surveys on wealth, income and consumption. We use panel regressions and an instrumental variable approach. First, our panel-based MPC estimates are very similar to those obtained on aggregate data and show substantial heterogeneity across countries. The wealth effect is coming both from housing and financial assets, while the main asset channel varies between countries. Second, the MPC is higher for low-wealth households, whatever the country. Third, we find some asymmetries across countries regarding the reaction to losses versus gains. Fourth, higher MPC is obtained for the two main consumption expenditure categories. Fifth, we find evidences that housing prices shock decreases consumption inequality while financial wealth shocks have a limited effect on consumption inequality.
- JEL Code:
- D12,E21,C21
- Network:
- Household Finance and Consumption Network (HFCN)
- 8 January 2020
-
Working Paper Series - Issue No. 2356Details
- Abstract:
- This paper investigates the relationship between bank funding costs and solvency for a large sample of euro area banks using two proprietary ECB datasets for both wholesale funding costs and deposit rates. In particular, the paper studies the relationship between bank solvency, on the one hand, and senior bond yields, term deposit rates and overnight deposit rates, on the other. The analysis finds a significant negative relationship between bank solvency and the different types of funding costs. It also shows that this relationship is non-linear, namely convex, for senior bond yields and term deposit rates. It also identifies a positive realistic solvency threshold beyond which the effect of an increase in solvency on senior bond yields becomes positive. The paper also finds that senior bond yields are more sensitive to a change in solvency than deposit rates. Among the deposit rates, the interest rates of the overnight deposits are the least sensitive. Banks' asset quality, profitability and liquidity seem to play only a minor role in driving funding costs while the ECB monetary policy stance, sovereign risk and financial markets uncertainty appear to be material drivers.
- JEL Code:
- G15,G21
- 7 January 2020
-
Working Paper Series - Issue No. 2355Details
- Abstract:
- We study what makes government bonds a safe asset. Building on a sample of monthly changes in government bond yields in 40 advanced and emerging countries, we analyse the sensitivity of yields to country specific fundamentals interacted with changes in global risk (VIX). We find that inertia (whether the bond behaved as a safe asset in the past) and good institutions foster a safe asset status, while the size of the debt market is also significant, reflecting the special role of the US. Within advanced and emerging markets, drivers are heterogeneous, with external sustainability in particular being relevant for the latter countries after the global financial crisis. Finally, the safe asset status does not appear to depend on whether the change in global risk is driven by financial shocks rather than by US monetary policy.
- JEL Code:
- E42,E52,F31,F36,F41
- 7 January 2020
-
Working Paper Series - Issue No. 2354Details
- Abstract:
- This paper asks whether a textbook Phillips curve can explain the behavior of core inflation in the euro area. A critical feature of the analysis is that we measure core inflation with the weighted median of industry inflation rates, which is less volatile than the common measure of inflation excluding food and energy prices. We find that fluctuations in core inflation since the creation of the euro are well explained by three factors: expected inflation (as measured by surveys of forecasters); the output gap (as measured by the OECD); and the pass-through of movements in headline inflation. Our specification resolves the puzzle of a “missing disinflation” after the Great Recession, and it diminishes the puzzle of a “missing inflation” during the recent economic recovery.
- JEL Code:
- E31,E32
- 7 January 2020
-
MFI interest rate statistics
- 6 January 2020
-
Working Paper Series - Issue No. 2353Details
- Abstract:
- We study identification in Bayesian proxy VARs for instruments that con-sist of sparse qualitative observations indicating the signs of shocks in specific periods. We propose the Fisher discriminant regression and a non-parametric sign concordance criterion as two alternative methods for achieving correct inference in this case. The former represents a minor deviation from a standard proxy VAR, whereas the non-parametric approach builds on set identification. Our application to U.S. macroprudential policies finds persistent declines in credit volumes and house prices together with moderate declines in GDP and inflation and a widening of corporate bond spreads after a tightening of capital requirements or mortgage underwriting standards.
- JEL Code:
- C32,E44,G38
- 6 January 2020
-
Survey of Monetary Analysts
- 3 January 2020
-
Working Paper Series - Issue No. 2352Details
- Abstract:
- We study the incidence and severity of periods with a binding effective lower bound on nominal interest rates and the efficacy of three types of state-dependent policies—forward guidance about the path of future interest rates, large-scale asset purchases and spending-based fiscal stimulus—in mitigating the detrimental consequences of the lower bound for macroeconomic stability. Based on the ECB’s New Area-Wide Model of the euro area, our findings suggest that, if left unaddressed, the lower bound can cause substantial macroeconomic distortions. In the near term, forward guidance, if fully credible, is most powerful and can largely undo these distortions. A combination of imperfectly credible forward guidance, asset purchases and fiscal stimulus is almost equally effective, especially when asset purchases enhance the credibility of the forward-guidance policy via a signalling effect. In the long run, with an equilibrium real rate as low as zero, a combination of all three policies is needed to materially reduce the distortions.
- JEL Code:
- E31,E32,E37,E52,E62
- 3 January 2020
-
Working Paper Series - Issue No. 2351Details
- Abstract:
- IT progress and its application to the financial industry have inspired central banks and academics to analyse the merits of central bank digital currencies (CBDC) accessible to the broad public. This paper first reviews the advantages and risks of such CBDC. It then discusses two prominent arguments against CBDC, namely (i) risk of structural disintermediation of banks and centralization of the credit allocation process within the central bank and (ii) risk of facilitation systemic runs on banks in crisis situations. Two-tier remuneration of CBDC is proposed as solution to both issues, and a comparison is provided with a simple cap solution and the solution of Kumhof and Noone (2018). Finally, the paper compares the financial account implications of CBDC with the ones of crypto assets, Stablecoins, and narrow bank digital money, in a domestic and international context.
- JEL Code:
- E3,E5,G1
- 3 January 2020
-
Monetary developments in the euro area
- 2 January 2020
-
Working Paper Series - Issue No. 2350Details
- Abstract:
- This paper investigates the efficiency of various monetary policy instruments to stabilize asset prices in a liquidity crisis. We propose a macro-finance model featuring both traditional and shadow banks subject to funding risk. When banks are well capitalized, they have access to money markets and efficiently mitigate funding shocks. When aggregate bank capital is low, a vicious cycle arises between declining asset prices and funding risks. The central bank can partially counter these dynamics. Increasing the supply of reserves reduces liquidity risk in the traditional banking sector, but fails to reach the shadow banking sector. When the shadow banking sector is large, as in the US in 2008, the central bank can further stabilize asset prices by directly purchasing illiquid securities.
- JEL Code:
- E43,E44,E52,G12
- Network:
- Research Task Force (RTF)
- 2 January 2020
-
Working Paper Series - Issue No. 2349Details
- Abstract:
- We analyse the effects of supranational versus national banking supervision on credit supply, and its interactions with monetary policy. For identification, we exploit: (i) a new, proprietary dataset based on 15 European credit registers; (ii) the institutional change leading to the centralisation of European banking supervision; (iii) high-frequency monetary policy surprises; (iv) differences across euro area countries, also vis-à-vis non-euro area countries. We show that supranational supervision reduces credit supply to firms with very high ex-ante and ex-post credit risk, while stimulating credit supply to firms without loan delinquencies. Moreover, the increased risk-sensitivity of credit supply driven by centralised supervision is stronger for banks operating in stressed countries. Exploiting heterogeneity across banks, we find that the mechanism driving the results is higher quantity and quality of human resources available to the supranational supervisor rather than changes in incentives due to the reallocation of supervisory responsibility to the new institution. Finally, there are crucial complementarities between supervision and monetary policy: centralised supervision offsets excessive bank risk-taking induced by a more accommodative monetary policy stance, but does not offset more productive risk-taking. Overall, we show that using multiple credit registers – first time in the literature – is crucial for external validity.
- JEL Code:
- E51,E52,E58,G01,G21,G28
- Network:
- Research Task Force (RTF)
- 31 December 2019
-
Weekly financial statementAnnexes
- 31 December 2019
-
Weekly financial statement - Commentary
- 27 December 2019
-
Economic Bulletin
- 27 December 2019
-
Economic Bulletin - BoxEconomic Bulletin Issue 8, 2019Details
- Abstract:
- This box reports the responses to an ad hoc question in the latest Survey on the Access to Finance of Enterprises (SAFE) regarding the export activities of euro area small and medium-sized enterprises (SMEs). In general, just over a third of euro area SMEs exported goods or services outside their domestic market. About half of those exported outside Europe, of which 60% to North America and 40% to China. Comparing sectors, export activities seem to be quite strong among SMEs in the industrial sector, followed by trade and services, but more limited in construction. Exporters, particularly those exporting outside Europe, tend to have a strong equity base and use trade credit. They also make more use of subsidised loans and tend to be more innovative.
- JEL Code:
- E24
- 27 December 2019
-
Economic Bulletin - BoxEconomic Bulletin Issue 8, 2019Details
- Abstract:
- This box proposes two complementary tools for assessing the performance of the labour market in the euro area. The first is a visualisation tool in the form of a spider chart that displays 18 variables characterising the current euro area labour market conditions. The second applies a principal component analysis to the variables in the spider chart and summarises the information on labour market conditions in two indicators: level of activity and labour market momentum. These indicators show that, in the second quarter of 2019, the level of activity in the euro area labour market was at a level comparable with the pre-crisis peak, while the labour market momentum remains elevated but is declining somewhat. The analysis suggests that there is scope for the level of activity in the euro area labour market to continue to improve in the near term, benefiting from an overall still positive labour market momentum.
- JEL Code:
- E24
- 27 December 2019
-
Economic Bulletin - BoxEconomic Bulletin Issue 8, 2019Details
- Abstract:
- This box describes the ECB’s monetary policy operations during the fifth and sixth reserve maintenance periods of 2019, which ran from 31 July to 17 September 2019 and from 18 September to 29 October 2019 respectively.
- JEL Code:
- E40,E52,E58
- 27 December 2019
-
Economic Bulletin - BoxEconomic Bulletin Issue 8, 2019Details
- Abstract:
- The expansion of global value chains (GVCs) over the past decades has influenced how trade tariffs affect economic activity. Global sourcing activities of firms imply that a tariff, usually imposed to protect a domestic industry, can entail higher input costs for other industries. The empirical evidence presented here corroborates this point: tariffs that raise input costs are found to negatively affect the output of industries relying on foreign sourcing. The analysis further suggests that the sensitivity of trade to tariffs is higher for production stages further downstream in global supply chains. In the context of the current trade dispute between the United States and China, this evidence may be of relevance, since the US tariffs against China affected a large number of intermediate goods and Chinese exports to the United States – in part – relate to downstream production stages of GVCs.
- JEL Code:
- F14,F15,E23
- 27 December 2019
-
Economic Bulletin - ArticleEconomic Bulletin Issue 8, 2019Details
- Abstract:
- Although recent wage growth has increasingly been in line with predictions, there has been a period of low and under-predicted wage growth in the euro area. This period of weak wage growth can be explained to a large extent by the drivers traditionally captured in a Phillips curve analysis, such as economic slack (including broader measures of labour market slack) and inflation expectations. However, these factors do not paint the full picture, as wages were consistently under-predicted during the period 2013-17. As wages differ across sectors and according to employees’ individual characteristics, significant changes in the composition of employment that have taken place in the euro area since the beginning of the crisis could have been an important factor in aggregate wage growth developments. These changes can result from slow-moving trends, cyclical changes or a combination of the two. This article discusses the role of such changes, known as “compositional effects”, in wage growth. It analyses the role of changes in the composition of employment with respect to the individual characteristics of employees (e.g. age, education or gender), employment types (e.g. permanent or temporary contracts) and sectoral shifts. The analysis is mainly based on microdata from the EU survey of income and living conditions, but the article also includes cross-checks and analyses based on the EU Labour Force Survey (EU-LFS) and national accounts data. The analyses indicate that compositional effects pushed up wage growth early in the crisis, but that the effect later decreased and turned negative. This has contributed to a relatively muted response from aggregate wage growth, both to the strong downturn of the labour market early in the crisis and later, from 2014 onwards, to cyclical improvements. Hence compositional effects have been one factor contributing to low wage growth in the euro area. The most important contributions to compositional effects seem to be related to changes in the age and educational structure of the workforce, which can have both a long-term and a cyclical impact. Looking at country-specific evidence, the euro area aggregate results have been influenced by Spain and Italy in particular.
- JEL Code:
- J30,E32
- 27 December 2019
-
Economic Bulletin - BoxEconomic Bulletin Issue 8, 2019Details
- Abstract:
- This box informs about the review of draft budgetary plans for 2020 and derives some implications for a reform of fiscal governance. To this end, it also identifies weaknesses in the review exercise notably with respect to the follow-up of recommendations by the Council that the budgetary plans are supposed to entail. It would be important that such shortcomings be addressed, inter alia, in the Commission’s forthcoming review of the “six-pack” and “two-pack” regulations, which were implemented in 2011 and 2013 respectively, in the aim of strengthening fiscal governance.
- JEL Code:
- H11,H50,H6
- 27 December 2019
-
Economic Bulletin - ArticleEconomic Bulletin Issue 8, 2019Details
- Abstract:
- This article examines bank lending conditions for euro area non-financial corporations (NFCs), making use of the wealth of soft information available in the euro area bank lending survey (BLS) since its inception in 2003. One relevant question in this context is whether the tightening of the bank loan supply during the financial and sovereign debt crises has been offset by the easing of bank lending conditions for NFC loans since 2014. The article illustrates that the easing over this period has come mainly through a substantial loosening of the actual terms and conditions applied by banks to new loans to firms of average credit quality, while the credit standards that banks have established for their loan approval decisions have eased by less. The article also draws on the responses of individual banks to examine the differences in bank lending conditions for NFC loans across bank business models. This analysis reveals that the change in credit conditions of banks with business models more reliant on stable funding sources, such as deposits, is more muted. In short, it looks at additional aspects that enhance the regular assessment of bank lending conditions faced by firms based on the euro area BLS.
- JEL Code:
- E4,E44,E5,E52,G21
- 27 December 2019
-
Economic Bulletin - BoxEconomic Bulletin Issue 8, 2019Details
- Abstract:
- The box assesses recent developments in social security contributions and minimum wages. It finds that social security contributions have led to a moderation of growth in composition of employee growth, while growth in wages and salaries per employee – excluding employers’ social security contributions – has remained quite robust. Over the last decade minimum wages have affected wage growth substantially in some countries, but only marginally in the euro area.
- JEL Code:
- J30,J38,E24
- 24 December 2019
-
Weekly financial statementAnnexes
- 24 December 2019
-
Weekly financial statement - Commentary
- 20 December 2019
- 20 December 2019
-
Governing Council decisions - Other decisions
- 20 December 2019
- 20 December 2019
-
Working Paper Series - Issue No. 2348Details
- Abstract:
- This paper describes a machine learning technique to timely identify cases of individual bank financial distress. Our work represents the first attempt in the literature to develop an early warning system specifically for small European banks. We employ a machine learning technique, and build a decision tree model using a dataset of official supervisory reporting, complemented with qualitative banking sector and macroeconomic variables. We propose a new and wider definition of financial distress, in order to capture bank distress cases at an earlier stage with respect to the existing literature on bank failures; by doing so, given the rarity of bank defaults in Europe we significantly increase the number of events on which to estimate the model, thus increasing the model precision; in this way we identify bank crises at an earlier stage with respect to the usual default definition, therefore leaving a time window for supervisory intervention. The Quinlan C5.0 algorithm we use to estimate the model also allows us to adopt a conservative approach to misclassification: as we deal with bank distress cases, we consider missing a distress event twice as costly as raising a false flag. Our final model comprises 12 variables in 19 nodes, and outperforms a logit model estimation, which we use to benchmark our analysis; validation and back testing also suggest that the good performance of our model is relatively stable and robust.
- JEL Code:
- E58,C01,C50
- 20 December 2019
-
Statistics Paper Series - Issue No. 32Details
- Abstract:
- This paper describes the Macroprudential Database (MPDB) of the European CentralBank (ECB), which is an important component of the ECB’s Statistical DataWarehouse. After explaining the rationale for creating the MPDB, the paper illustrateshow it supports the macroprudential analysis conducted by the European System ofCentral Banks (ESCB), the European Systemic Risk Board (ESRB) and the nationalauthorities of the Single Supervisory Mechanism (SSM) and the European Union. Thestructure of the database and a broad overview of available indicators are thenpresented, with a description of the relevant confidentiality issues. Examples illustratehow the MPDB is used for monitoring purposes and econometric modelling. Finally,the paper discusses remaining data gaps and expected future enhancements of thedatabase.
- JEL Code:
- C82,E60
- 20 December 2019
- 20 December 2019
-
Balance of payments (monthly)
- 20 December 2019
-
Economic Bulletin - BoxEconomic Bulletin Issue 8, 2019Details
- Abstract:
- On 30 October 2019 the ECB implemented a two-tier system under which a portion of credit institutions’ excess liquidity holdings with the Eurosystem are exempt from remuneration at negative rates. The aim of the two-tier system is to support the bank-based transmission of monetary policy in preserving the overall positive contribution of negative rates to the accommodative stance of monetary policy. With the introduction of the two-tier system banks holding less excess liquidity than their exemption allowance increased their excess liquidity holdings by borrowing from banks exceeding their exemption allowances. The bulk of banks’ increased borrowing in the money market occurred via secured transactions. Although the increase in trading activity temporarily coincided with higher money market rates, experience with the two-tier system over its first month shows that money market rates were only marginally affected and remain well aligned with the policy rate.
- JEL Code:
- E52,E58,G1
- 19 December 2019
-
Working Paper Series - Issue No. 2347Details
- Abstract:
- The purpose of this paper is to compare the cyclical behavior of various credit impairment accounting regimes, namely IAS 39, IFRS 9 and US GAAP. We model the impact of credit impairments on the Profit and Loss (P&L) account under all three regimes. Our results suggest that although IFRS 9 is less procyclical than the previous regulation (IAS 39), it is more procyclical than US GAAP because it merely requests to provision the expected loss of one year under Stage 1 (initial category). Instead, since US GAAP prescribes that lifetime expected losses are fully provisioned at inception, the amount of new loans originated is negatively correlated with realized losses. This leads to relatively higher (lower) provisions during the upswing (downswing) phase of the financial cycle. Nevertheless, the lower procyclicality of US GAAP seems to come at cost of a large increase in provisions.
- JEL Code:
- G21,G28,K20
- 19 December 2019
-
Working Paper Series - Issue No. 2346Details
- Abstract:
- The 20th anniversary of Economic and Monetary Union (EMU) offers an opportunity to look back on the ECB’s record and learn lessons that can improve the conduct of policy in the future. This paper charts the way the ECB has defined, interpreted and applied its monetary policy framework – its strategy – over the years from its inception, in search of evidence and lessons that can inform those reflections. Our “Tale of Two Decades” is largely a tale of “two regimes”: one – stretching slightly beyond the ECB’s mid-point – marked by decent growth in real incomes and a distribution of shocks to inflation almost universally to the upside; and the second – starting well into the post-Lehman period – characterised by endemic instability and crisis, with the distribution of shocks eventually switching from inflationary to continuously disinflationary. We show how the most defining element of the ECB’s monetary policy framework, its characteristic definition of price stability with a hard 2% ceiling, functioned as a key shock-absorber in the relatively high-inflation years prior to the crisis, but offered a softer defence in the face of the disinflationary forces that hit the euro area in its aftermath. The imperative to halt persistent disinflation in the post-crisis era therefore called for a radical, unprecedented policy response, comprising negative policy rates, enhanced forms of forward guidance, a large asset purchase programme and targeted long-term loans to banks. We study the multidimensional interactions among these four instruments and quantify their impact on inflation and economic activity.
- JEL Code:
- E50,E51,E52
- 19 December 2019
-
Economic Bulletin - ArticleEconomic Bulletin Issue 8, 2019Details
- Abstract:
- This article evaluates the performance of the Eurosystem/ ECB staff macroeconomic projections for the euro area in the context of the elevated macroeconomic volatility and uncertainty that has prevailed since the financial crisis. It finds that there has been considerable variability in projection errors over time. With regard to real GDP growth projections, errors that were substantial during the sovereign debt crisis have become more limited in recent years. As for headline inflation, unexpected fluctuations in oil prices – which in the staff macroeconomic projections are assumed to follow the path of oil price futures – played a dominant role in explaining the errors, as was the case during the pre-crisis years. On the other hand, HICP inflation excluding energy and food has been persistently overprojected since 2013. While these projection errors can also partly be attributed to errors in the conditioning technical assumptions, other factors (such as modelling errors, changes in economic relationships or judgement) have also played a key role at different points in time. The forecast performance of the Eurosystem/ECB staff macroeconomic projections has been broadly similar to that of other international institutions and of private sector forecasters, suggesting that projection errors have been mainly driven by common elements. These may include economic shocks unforeseeable to any forecaster and developments that have become more prominent since the financial crisis, including, among other things, structural reforms, changes in the relationship between slack and prices, globalisation and digitalisation.
- JEL Code:
- C53,E37,E58
- 18 December 2019
-
SpeechDetails
- Subtitle:
- Speech by Benoît Cœuré, Member of the Executive Board of the ECB, at the ECB colloquium on “Monetary policy: the challenges ahead” held in his honour
- 18 December 2019
-
Working Paper Series - Issue No. 2345Details
- Abstract:
- Using a novel methodology, we offer new evidence that a threshold relationship exists for Okun’s law. We use a logistic smoothed transition regression (LSTR) model where possible threshold endogeneity is addressed based on copula theory. We also suggest a new test of the linearity hypothesis against the LSTR model. A combination of structural and policy-related variables accounts for changes (rises) in the Okun’s parameter in the US in recent decades. Accordingly, the unemployment gap is increasingly associated with a smaller output gap. Whilst the Great Recession accelerated that rise, the bulk of the change occurred beforehand.
- JEL Code:
- C46,E23,E24,C24
- 18 December 2019
-
Working Paper Series - Issue No. 2344Details
- Abstract:
- We review the determinants of the discretionary fiscal policy action of governments in the euro area and in other advanced economies during the past 20 years. This is done by estimating fiscal reaction functions using dynamic panel techniques and country-by-country estimates. The results suggest that, on average, discretionary fiscal policy did not deliver economic stabilisation: during good economic times (positive output gaps) it has been on average pro-cyclical both in the euro area and in the other regions. However, the loosening bias during good times has been countered by the presence of efficient public institutions, higher long term interest rates and higher debt-to-GDP ratios. Overall, as a result of various counterbalancing forces, fiscal activism has not been a major feature of policy making in the euro area, nor in other advanced economies during the past 20 years.
- JEL Code:
- E62,H6,C23
- 17 December 2019
-
Weekly financial statementAnnexes
- 17 December 2019
-
Weekly financial statement - Commentary
- 17 December 2019
-
Legal conference proceedings
- 17 December 2019
-
Working Paper Series - Issue No. 2343Details
- Abstract:
- This study extends a thick modelling tool for aggregated euro area real private consumption of de Bondt et al. (2019) to the four largest euro area countries. The suite of error correction models performs well in and out of sample. The ranges and averages of estimated elasticities are, however, sensitive to the exact model specification. We also show that decomposing disposable income into labour, property and transfer income is essential for understanding and forecasting consumption. Finally, substantial crosscountry heterogeneity in marginal propensities to consume out of income and wealth components calls for caution when interpreting aggregate euro area developments.
- JEL Code:
- C53,D12,E21,E27
- 17 December 2019
-
Working Paper Series - Issue No. 2342Details
- Abstract:
- The global nature of derivatives markets, and the presence of large key financial institutions trading in several markets across the globe, call for taking a “macro” view on the interconnections arising in the clearing network. Based on the analysis of derivatives transactions data reported under the EMIR Regulation we reconstruct the network of relationships in the centrally-cleared derivatives market and analyse its topology providing insight into its structural features. The centrally-cleared derivatives network is modelled in the form of a multiplex network where each layer is represented by a derivatives asset class market. In turn, each node represents a single counterparty in that market. On the basis of different centrality measures applied to the collapsed aggregate and to the multiplex network, the critical participants of the euro area centrally-cleared derivatives market are identified and their level of interconnectedness analysed. This paper provides insight on how the collected data pursuant to the EMIR regulation can be used to shed light on the complex network of interrelations underlying the financial markets. It provides indications on structural features of the euro area centrally-cleared derivatives market and discusses policy relevant implications and future applications.
- JEL Code:
- G01,G15,G23
- 16 December 2019
-
InterviewDetails
- Subtitle:
- Interview with Benoît Cœuré, Member of the Executive Board of the ECB, conducted by Jean Quatremer on 4 December, and published on 16 December 2019
- 16 December 2019
-
InterviewDetails
- Subtitle:
- Transcript of the interview with Christine Lagarde, President of the ECB, conducted by Mariëlle Tweebeeke, NOS Nieuwsuur, on 12 December 2019 and broadcast (in part) on 12 December 2019
- 16 December 2019
-
SpeechDetails
- Subtitle:
- Remarks by Luis de Guindos, Vice-President of the ECB, at the fourth annual ECB macroprudential policy and research conference
- 16 December 2019
-
SpeechDetails
- Subtitle:
- Speech by Philip R. Lane, Member of the Executive Board of the ECB, at the Central Bank of Ireland/ECB Conference on Household Finance and Consumption
- 16 December 2019
-
Working Paper Series - Issue No. 2341Details
- Abstract:
- Using a large set of firm-level survey data from the euro area since 2009, we analyse how firms use their information to form expectations on the availability of bank finance. Our results suggest that firms update what otherwise look like adaptive expectations on the basis of the latest information in their information set. As in the previous literature, the hypothesis that expectations fulfil the (orthogonality) conditions of the rational expectations hypothesis is rejected by the data. We find evidence that this is not only due to information imperfections but also to some type of misspecification of the expectations’ model that firms are using. In addition, we find some evidence that companies that have not used bank finance recently tend to do worse at forecasting its availability next period. To test how policy announcements may affect expectations, we concentrate on the possible effects of the ECB policy announcements of summer 2012, which included among other things the announcement of the European Central Bank’s Outright Monetary Transactions Program (OMT). Using a difference-in-differences approach, we find evidence of forward-looking expectations. In particular, shortly after the OMT announcement the forecast of “informed” firms were more upbeat compared to the control group of firms. This moreover was true in both vulnerable and non-vulnerable countries, suggesting that it was the relevance of the information about the future of the banking system that most mattered for expectations at the time, more than the immediate impact of the announced policy measures.
- JEL Code:
- C83,D22,D84
- 16 December 2019
-
Working Paper Series - Issue No. 2340Details
- Abstract:
- This paper studies how peers’ financial behaviour affects individuals’ own investment choices. To identify the peer effect, we exploit the unique composition of the Luxembourg population and use the differences in stock market participation across various immigrant groups to study how they affect stock market participation of natives. We solve the reflection problem by instrumenting immigrants’ stock market participation with lagged participation rates in their countries of birth. We separate the peer effect from the contextual and correlated effects by controlling for neighbourhood and individual characteristics. We find that stock market participation of immigrant peers has sizeable effects on that of natives. We also provide evidence that social learning is one of the channels through which the peer effect is transmitted. However, social learning alone does not account for the entire effect and we conclude that social utility might also play an important role in peer effects transmission.
- JEL Code:
- G5,D14,D83,G11,I22
- Network:
- Household Finance and Consumption Network (HFCN)
- 13 December 2019
-
SpeechDetails
- Subtitle:
- Speech by Luis de Guindos, Vice-President of the ECB, at the conference Financial Integration and Inclusive Development – A View from the Mediterranean Countries, jointly organised by Banco de España, OECD and European Institute of the Mediterranean (IEMed)
- 13 December 2019
- 13 December 2019
- 13 December 2019
- 13 December 2019
-
Working Paper Series - Issue No. 2339Details
- Abstract:
- We examine whether emerging market prudential policies help to reduce the macrofinancial spillover effects of US monetary policy. We find that emerging markets with tighter prudential policies face significantly smaller, and less negative, spillovers to total credit from US monetary policy tightening shocks. Loan-to-value ratio limits and reserve requirements appear to be particularly effective prudential measures at mitigating the spillover effects of US monetary policy. Our findings indicate that domestic prudential policies can dampen emerging markets’ exposure to US monetary policy and the associated global financial cycle, even when accounting for capital controls, suggesting they may be a useful tool in the face of international macroeconomic policy trade-offs.
- JEL Code:
- E52,E58,E61,F44
- 13 December 2019
-
Statistics Paper Series - Issue No. 31Details
- Abstract:
- Much of the literature on inequality, both that on the theoretical features of inequality measurement and that on the discussion of the results of empirical analysis, has preferred to focus on income inequality. This paper looks into the analysis of wealth inequality, which can be performed by carefully adapting the techniques used in the case of income distributions. The paper focuses on the measurement of inequality itself and includes an application to European data on wealth. We summarise the main inequality measures used in the economic literature, expanding the focus to lesser known but relevant ones, grounding their use in socio-economic theory and highlighting the connections between them. In particular, we investigate how each measure captures the same movement in the wealth distribution and why different measures can lead to differences in the observed change in inequality over time or across countries. In the main theoretical contribution of the paper we obtain a novel decomposition of changes in inequality measures as a set of equalising and disequalising factors, which sheds some light on the different results across indicators. We complement the analysis by focusing on the decomposition of wealth inequality measures, gaining an understanding of the contributions of inequality by wealth component and socio-demographic characteristics. The distribution of wealth of European households obtained by the Household Finance and Consumption Survey (HFCS) in 2010 and 2014 is used for empirical analysis and application of our methods.
- JEL Code:
- D31,D63
- Network:
- Household Finance and Consumption Network (HFCN)
- 12 December 2019
-
Macroeconomic projections for the euro areaAnnexes
- 12 December 2019
- 27 December 2019
-
Macroeconomic projections for the euro area
- 12 December 2019
-
Monetary policy statementDetails
- Subtitle:
- Christine Lagarde, President of the ECB,Luis de Guindos, Vice-President of the ECB,Frankfurt am Main, 12 December 2019
- 12 December 2019
-
Monetary policy decision
- 11 December 2019
- 11 December 2019
-
Euro area securities issues statistics
- 10 December 2019
-
Weekly financial statementAnnexes
- 10 December 2019
-
Weekly financial statement - Commentary
- 4 December 2019
- 4 December 2019
-
Working Paper Series - Issue No. 2338Details
- Abstract:
- Trend inflation estimates for 12 of the largest Asian economies over 1995-2018 offer important insights on inflation dynamics and inflation expectations. The disinflationary shocks that hit the region since 2014 were partly transitory, but their effects have been different depending on the behaviour of trend inflation in each country. Countries with relatively high inflation (India, Philippines, Indonesia) benefited, and some were impacted very mildly (China, Taiwan, Hong Kong SAR, Malaysia). Among countries with inflation below target, in those with trend inflation low but constant (Australia, New Zealand) low inflation maybe lasting, but temporary, while those in which trend inflation has declined (South Korea, Thailand) risk low inflation to become entrenched and a de-anchoring of expectations. This diverse international evidence could offer important lessons for monetary policy worldwide.
- JEL Code:
- C11,C32,E31,F41
- 4 December 2019
-
Working Paper Series - Issue No. 2337Details
- Abstract:
- We add to the literature on the influence of the global financial cycle (GFC) and gyrations in capital flows. First, we build a new measure of the GFC based on a structural factor approach, which incorporates theoretical priors in its definition. This measure can also be decomposed in a price-based and quantity-based version of the GFC, which is novel in the literature. Second, we compare our measure to other common existing indicators of the GFC. Third, we estimate the influence of the fluctuations in the GFC on capital flow episodes (sudden stops, flights, retrenchments, surges) and currency crises, also testing for its stability and linearity. We find that the nexus between the GFC and capital flow episodes is generally consistent and not very wobbly. In line with theoretical priors, we find some evidence that the GFC is more important for sudden stops when it is more negative, i.e. the relationship is (mildly) convex, in keeping with a role for occasionally binding constraints, but the evidence for this feature is not strong.
- JEL Code:
- F32,F33,F36,F42,F44
- 4 December 2019
-
MFI interest rate statistics
- 4 December 2019
-
Research Bulletin - Issue No. 65Details
- Abstract:
- Many economic models assume that households have up-to-date information. Here, we relax this assumption and see how that affects consumption at the household and aggregate level. To be specific, our model assumes that households only occasionally update their information about macroeconomic quantities. What’s unique about our model is that it can reconcile the very low persistence of consumption growth seen at the household level with it being substantially persistent at the aggregate level. In short, our model better fits micro and macro data. Concerning fiscal policy, our model can explain the fact that consumption reacts little to the announcement of a fiscal stimulus but substantially to the actual receipt of a stimulus payment.
- JEL Code:
- D83,D84,E21,E32
- 3 December 2019
-
SpeechDetails
- Subtitle:
- Speech by Benoît Cœuré, Member of the Executive Board of the ECB, at the ECB Representative Office in Brussels, 3 December 2019
- 3 December 2019
-
Weekly financial statementAnnexes
- 3 December 2019
-
Weekly financial statement - Commentary
- 3 December 2019
-
Working Paper Series - Issue No. 2336Details
- Abstract:
- This paper analyzes the effects of several policy instruments for mitigating financial bubbles generated in the banking sector. We augment a New Keynesian macroeconomic framework by endogenizing boundedly-rational expectations on asset values of loan portfolios, allow for interbank trading and show how a credit bubble can develop from a financial innovation. We then evaluate the efficacy of several policy instruments in counteracting financial bubbles. We find that an endogenous capital requirement reduces the impact of a financial bubble significantly while central bank intervention (“leaning against the wind”) proves to be less effective. A welfare analysis ranks the policy reaction through an endogenous capital requirement highest. We therefore provide a rationale for the use of countercyclical capital buffers.
- JEL Code:
- E44,E52
- 3 December 2019
-
Working Paper Series - Issue No. 2335Details
- Abstract:
- The post-crisis environment has posed important challenges to standard forecasting models. In this paper, we exploit several combinations of a large-scale DSGE structural model with standard reduced-form methods such as (B)VAR (i.e. DSGE-VAR and Augmented-(B)VARDSGE methods) and assess their use for forecasting the Spanish economy. Our empirical findings suggest that: (i) the DSGE model underestimates growth of real variables due to its mean reverting properties in the context of a sample that is difficult to deal with; (ii) in spite of this, reduced-form VARs benefit from the imposition of an economic prior from the structural model; and (iii) pooling information in the form of variables extracted from the structural model with (B)VAR methods does not give rise to any relevant gain in terms of forecasting accuracy.
- JEL Code:
- C54,E37,F3,F41
- 2 December 2019
-
SpeechDetails
- Subtitle:
- Introductory statement by Christine Lagarde, President of the ECB, at the ECON committee of the European Parliament
Annexes- 4 December 2019
-
Speech
- 2 December 2019
-
Working Paper Series - Issue No. 2334Details
- Abstract:
- We explore the interaction between labour market reforms and financial frictions. Our study combines a new cross-country reform database on labour market reforms with matched firm-bank data for nine euro area countries over the period 1999 to 2013. While we find that labour market reforms are overall effective in increasing employment, restricted access to bank credit can undo up to half of long-term employment gains at the firm-level. Entrepreneurs without sufficient access to credit cannot reap the full benefits of more flexible employment regulation.
- JEL Code:
- G21,J21,J60,K31
- 2 December 2019
-
Working Paper Series - Issue No. 2333Details
- Abstract:
- The paper evaluates the impact of the Chinese minimum wage policy on consumption of low-wage households for the period 2002-2009. Using a representative household panel, we find that the consumption response to minimum wage income shock is increasing in the minimum wage share of household income and that poorer households fully consume their additional income. The large marginal propensity to consume is driven by households with at least one child, while childless poor households save two thirds of a minimum wage hike. The expenditure increase is concentrated in health care and education with potentially long-lasting benefits to household welfare.
- JEL Code:
- E24,J38,C26
- 2 December 2019
-
Euro area insurance corporations statistics
- 1 December 2019
-
InterviewDetails
- Subtitle:
- Interview with Luis de Guindos, Vice-President of the ECB, conducted by Pablo Rodríguez Suanzes on 25 November 2019
- 29 November 2019
-
SpeechDetails
- Subtitle:
- Closing remarks by Luis de Guindos, Vice-President of the ECB, at the VIII High-level Policy Dialogue between Eurosystem and Latin American central banks
- 29 November 2019
-
Working Paper Series - Issue No. 2332Details
- Abstract:
- Productivity performance in European countries has been a policy concern for some time. This paper shows that productivity can be enhanced by product market policies which, by increasing competition and efficiency, facilitate higher rates of firms’ entry and exit (i.e., firm churning). Drawing on annual country-sector data for the period 2000-2014 across the EU countries, we find that: (i) competition-enhancing regulation is associated with a higher rate of firm churning; (ii) business churning, in turn, appears to be positively related to higher total factor productivity at the sector level by facilitating the entry of new competitive firms and the exit of less productive ones. Overall, we conclude that stringent product market regulation can be indirectly associated, via its impact on business dynamism, with the somewhat weak productivity performance in a number of EU countries. Thus, our results point towards significant productivity gains that could follow from the introduction of further competition-enhancing measures in product markets.
- JEL Code:
- L51,P23,D21,D24,O40
- 29 November 2019
-
Survey on the Access to Finance of Enterprises in the euro area - Issue No. 2019Annexes
- 29 November 2019
-
SAFE questionnaire
Related- 29 November 2019
- 29 November 2019
-
Press releaseRelated
- 29 November 2019
-
Survey on the Access to Finance of Enterprises in the euro area - Issue No. 2019
- 28 November 2019
-
SpeechDetails
- Subtitle:
- Remarks by Philip R. Lane, Member of the Executive Board of the ECB, at the National Treasury Management Agency
- 28 November 2019
-
SpeechDetails
- Subtitle:
- Remarks by Benoît Cœuré, Member of the Executive Board of the ECB, at the PSE job forum, Paris School of Economics
- 28 November 2019
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Monetary developments in the euro area
- 27 November 2019
-
SpeechDetails
- Subtitle:
- Welcome address by Christine Lagarde, President of the ECB, on signing the euro banknotes
- 27 November 2019
-
Research Bulletin - Issue No. 64Details
- Abstract:
- This article provides evidence that economies receiving more funding from stock markets than credit markets generate fewer carbon emissions. Increasing the equity financing share to one-half globally would reduce aggregate per capita emissions by about one-quarter of the Paris Agreement commitment. Our findings call for supporting equity-based initiatives rather than policies aimed at decarbonising the European economy through the banking sector.
- JEL Code:
- G10,O4,Q5
- 26 November 2019
-
Weekly financial statementAnnexes
- 26 November 2019
-
Weekly financial statement - Commentary
- 26 November 2019
-
SpeechDetails
- Subtitle:
- Speech by Benoît Cœuré, Member of the Executive Board of the ECB, at the Joint Conference of the ECB and the National Bank of Belgium on “Crossing the chasm to the retail payments of tomorrow”
- 25 November 2019
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SpeechDetails
- Subtitle:
- Dinner speech by Yves Mersch, Member of the Executive Board of the ECB and Vice-Chair of the Supervisory Board of the ECB, at the IIF 6th Annual European Banking Union Colloquium
- 25 November 2019
-
SpeechDetails
- Subtitle:
- Speech by Philip R. Lane, Member of the Executive Board of the ECB, Public Lecture for the Centre for Finance and the Department of Economics at University College London
- 25 November 2019
-
Survey of Monetary Analysts - Issue No. 2019
- 23 November 2019
-
InterviewDetails
- Subtitle:
- Transcript of the interview with Philip R. Lane, Member of the Executive Board of the ECB, conducted by Alessandro Marenzi, Sky TG24, with the participation of Federico Fubini, Corriere della Sera, and Franco Bruni, Bocconi University, broadcast on 23 November 2019
- 22 November 2019
- 22 November 2019
-
SpeechDetails
- Subtitle:
- Speech by Christine Lagarde, President of the ECB, at the Frankfurt European Banking Congress
- 21 November 2019
-
Monetary policy account
- 21 November 2019
-
Occasional Paper Series - Issue No. 237Details
- Abstract:
- The prolonged crisis exposed the vulnerability of a monetary union without a banking union. The Single Supervisory Mechanism (SSM), which started operating in November 2014, is an essential step towards restoring banks to health and rebuilding trust in the banking system. The ECB is today responsible for setting a single monetary policy applicable throughout the euro area and for supervising all euro area banks in order to ensure their safety and soundness, some directly and some indirectly. Its role in the area of financial stability has also expanded through the conferral of macroprudential tasks and tools that include tightening national measures when necessary. It thus carries out these complementary functions, while its primary objective of pursuing price stability remains unchanged. What are the working arrangements of this enlarged ECB, and what are the similarities and existing synergies among these functions? In the following pages, focusing on the organisational implications of the “new” ECB, we show the relative degrees of centralisation and decentralisation that exist in discharging these functions, the cycles of policy preparation and the rules governing interaction between them.
- JEL Code:
- E42,E58,F36,G21
- 21 November 2019
-
SpeechDetails
- Subtitle:
- Speech by Luis de Guindos, Vice-President of the ECB, at the European Savings and Retail Banking Group Conference, “Creating sustainable financial structures by putting citizens first”
- 21 November 2019
-
SpeechDetails
- Subtitle:
- Speech by Yves Mersch, Member of the Executive Board of the ECB and Vice-Chair of the Supervisory Board of the ECB, at the S&P Global’s European Financial Institutions Conference, Paris
- 20 November 2019
-
InterviewDetails
- Subtitle:
- Q&A with Philip R. Lane, Member of the Executive Board of the ECB, conducted by Maithreyi Seetharaman on 18 November 2019 at Fortune Global Forum
- 20 November 2019
-
Working Paper Series - Issue No. 2331Details
- Abstract:
- We study the interplay between two channels of interconnectedness in the banking system. The first one is a direct interconnectedness, via a network of interbank loans, banks' loans to other corporate and retail clients, and securities holdings. The second channel is an indirect interconnectedness, via exposures to common asset classes. To this end, we analyze a unique supervisory data set collected by the European Central Bank that covers 26 large banks in the euro area. To assess the impact of contagion, we apply a structural valuation model NEVA (Barucca et al., 2016a), in which common shocks to banks' external assets are reflected in a consistent way in the market value of banks' mutual liabilities through the network of obligations. We identify a strongly non-linear relationship between diversification of exposures, shock size, and losses due to interbank contagion. Moreover, the most systemically important sectors tend to be the households and the financial sectors of larger countries because of their size and position in the financial network. Finally, we provide policy insights into the potential impact of more diversified versus more domestic portfolio allocation strategies on the propagation of contagion, which are relevant to the policy discussion on the European Capital Market Union.
- JEL Code:
- C45,C63,D85,G21
- 20 November 2019
-
Financial Stability Review - Issue No. 2Annexes
- 20 November 2019
Related- 20 November 2019
- 20 November 2019
-
Press releaseRelated
- 20 November 2019
-
Financial Stability Review - Issue No. 2
- 20 November 2019
-
Euro area financial vehicle corporation statistics
- 20 November 2019
-
Euro area investment fund statistics
- 20 November 2019
-
Financial Stability Review - ArticleFinancial Stability Review Issue 2, 2019Details
- Abstract:
- This special feature discusses several ways in which the measurement of banks’ systemic footprint can be complemented with new indicators. The international approach is largely mechanical, but is intended to be complemented by expert judgement. The proposed additional systemic footprint measures may help macroprudential authorities in exercising that judgement. Using loan-level data matched with individual corporate balance sheet information allows macroprudential authorities to gain a better understanding of how a bank’s failure may affect employment and economic activity. Similar data, used in a model of network contagion, help assess the impact of a bank’s failure on the rest of the system. While the measures proposed in this special feature are not embedded in O-SII or G-SII scores, some evidence suggests that the concepts discussed have informed decisions of macroprudential authorities.
- 20 November 2019
-
InterviewDetails
- Subtitle:
- Interview with Philip R. Lane, Member of the Executive Board of the ECB, conducted by Tonia Mastrobuoni on 14 November 2019
- 19 November 2019
-
Weekly financial statementAnnexes
- 19 November 2019
-
Weekly financial statement - Commentary
- 19 November 2019
-
Euro money market statistics
- 19 November 2019
-
Balance of payments (monthly)
- 18 November 2019
-
Financial Stability Review - ArticleFinancial Stability Review Issue 2, 2019Details
- Abstract:
- Low aggregate bank profitability in the euro area, which weakens the resilience of the euro area banking sector, is partly explained by the persistent underperformance of a sub-set of banks. These banks all stand out in terms of elevated cost-to-income ratios. But there also appear to be three distinct groups: (i) banks struggling with legacy asset problems; (ii) banks with weak income-generation capacity; and (iii) banks suffering from a combination of cost and revenue-side problems. The common cost inefficiency problem seems most pronounced for the largest and smallest banks. Three strategies, all of which should reduce overcapacity, could address the root causes, while avoiding increasing market power or the systemic footprint of institutions which are already systemically important. For some banks, the focus should be on targeting continued high stocks of NPLs. But in systems with many weak-performing small banks, consolidation within their domestic system could improve performance. Finally, a combination of bank-level restructuring and cross-border M&A activity could help reduce the costs and diversify the revenues of large banks that are performing poorly.,(ii) banks with weak income-generation capacity,and (iii) banks suffering from a combination of cost and revenue-side problems. The common cost inefficiency problem seems most pronounced for the largest and smallest banks. Three strategies, all of which should reduce overcapacity, could address the root causes, while avoiding increasing market power or the systemic footprint of institutions which are already systemically important. For some banks, the focus should be on targeting continued high stocks of NPLs. But in systems with many weak-performing small banks, consolidation within their domestic system could improve performance. Finally, a combination of bank-level restructuring and cross-border M&A activity could help reduce the costs and diversify the revenues of large banks that are performing poorly.
- 18 November 2019
-
Working Paper Series - Issue No. 2330Details
- Abstract:
- A quantile vector autoregressive (VAR) model, unlike standard VAR, models the interaction among the endogenous variables at any quantile. Forecasts of multivariate quantiles are obtained by factorizing the joint distribution in a recursive structure. VAR identification strategies that impose restrictions on the joint distribution can be readily extended to quantile VAR. The model is estimated using real and financial variables for the euro area. The dynamic properties of the system change across quantiles. This is relevant for stress testing exercises, whose goal is to forecast the tail behavior of the economy when hit by large financial and real shocks.
- JEL Code:
- C32,C53,E17,E32,E44
- Network:
- Research Task Force (RTF)
- 18 November 2019
-
SpeechDetails
- Subtitle:
- Opening speech by Luis de Guindos, Vice-President of the ECB, at the 22nd Euro Finance Week
- 15 November 2019
-
SpeechDetails
- Subtitle:
- Presentation by Philip R. Lane, Member of the Executive Board of the ECB, at the European Commission’s Annual Research Conference in Brussels, 15 November 2019
- 15 November 2019
-
Governing Council decisions - Other decisions
- 15 November 2019
-
SpeechDetails
- Subtitle:
- Speech by Yves Mersch, Member of the Executive Board of the ECB and Vice-Chair of the Supervisory Board of the ECB, at the Colloque de l’AEDBF-Europe, Paris, 15 November 2019
- 14 November 2019
-
SpeechDetails
- Subtitle:
- Keynote speech by Philip R. Lane, Member of the Executive Board of the ECB, CEPR International Macroeconomics and Finance Programme Meeting
- 14 November 2019
-
Working Paper Series - Issue No. 2329Details
- Abstract:
- We assess the effect and the timing of the corporate arm of the ECB quantitative easing (CSPP) on corporate bond issuance. Because of several contemporaneous measures, to isolate the programme effects we rely on one key eligibility feature: the euro denomination of newly issued bonds. We find that the significant increase in bonds issuance by eligible firms is due to the CSPP and that this effect took at least six months to unfold. This result holds even when comparing firms with similar ratings, thus providing evidence that unconventional monetary policy can foster a financing diversification regardless of firms risk profile.
- JEL Code:
- E52,G15,G32
- 14 November 2019
-
Working Paper Series - Issue No. 2328Details
- Abstract:
- Using microdata from the second wave of the Household Finance and Consumption Survey, we investigate the accuracy of property values estimated by homeowners - so called “self-assessed” house prices - and explore the drivers of possible deviations of these prices from official hedonic house price indices. We find evidence that euro area homeowners overestimate the value of their properties by around 9%. Across the largest euro area countries, the overestimation lies in a range between 3.2% in Germany and 22% in Italy. Household characteristics, including the level of indebtedness, appear to explain significant discrepancies between hedonic and self-assessed house price indices, while the limited available data related to property characteristics are generally not affecting this gap. For the euro area, we find that higher self-assessed house prices are associated with a mild increase in consumption expenditures.
- JEL Code:
- E31,C21,O18
- Network:
- Household Finance and Consumption Network (HFCN)
- 13 November 2019
- 13 November 2019
-
Euro area securities issues statistics
- 12 November 2019
-
InterviewDetails
- Subtitle:
- Interview with Luis de Guindos, Vice-President of the ECB, conducted by Mark Schrörs and Detlef Fechtner on 5 November 2019 and published on 12 November
- 12 November 2019
-
Weekly financial statementAnnexes
- 12 November 2019
-
Weekly financial statement - Commentary
- 12 November 2019
-
Press releaseRelated
- 12 November 2019
- 12 November 2019
-
Other publicationRelated
- 12 November 2019
- 12 November 2019
-
SpeechDetails
- Subtitle:
- Remarks by Yves Mersch, Member of the Executive Board of the ECB and Vice-Chair of the Supervisory Board of the ECB, Roundtable Discussion on Central Bank Independence
- 12 November 2019
-
SpeechDetails
- Subtitle:
- Speech by Benoît Cœuré, Member of the Executive Board of the ECB, at the ECB workshop on money markets, monetary policy implementation and central bank balance sheets
- 11 November 2019
-
SpeechDetails
- Subtitle:
- Opening remarks by Yves Mersch, Member of the Executive Board of the ECB and Vice-Chair of the Supervisory Board of the ECB, at the “Getting to know the EU Institutions and Organisations in Luxembourg” event
- 11 November 2019
-
Occasional Paper Series - Issue No. 236Details
- Abstract:
- This paper takes an eclectic approach to investigating the notion of overcapacities in banking along the dimensions of (i) banking sector size, (ii) bank competition and (iii) banking infrastructure/efficiency, thereby offering a nuanced and granular view of the topic. In terms of measurement, a newly developed composite indicator synthesises these different layers into a single metric of overcapacities in banking, comparing developments in major advanced economies across the globe over the period from 2006 to 2017. Offering a relative comparison across countries and time, the composite indicator suggests that most countries in the sample have managed to reduce overcapacities in banking since the onset of the global financial crisis, albeit to varying degrees, as some were better able to adapt to the changing environment than others, in particular by deleveraging, rationalising costly physical infrastructure and exploiting the benefits of technological innovation. A panel framework is then used to analyse a number of hypotheses derived from the literature, with the aim of shedding light on the determinants of overcapacities in banking, the direction of the relationship, and their relative importance. The results indicate that non-bank competition, the interest rate environment as well as bank business models are the most important driving factors of the overall degree of overcapacity in banking. With respect to the specific dimensions, non-bank competition seems to be particularly relevant for the size pillar, while demographic features and technological innovation appear to play a prominent role for explaining the competition and infrastructure/efficiency dimensions. The findings provide useful insights for policy makers concerning the possible design, calibration and effectiveness of potential policy responses that aim to address the issue of overcapacities in banking.
- JEL Code:
- C12,C23,G21,L1,O57
- 7 November 2019
-
Survey on credit terms and conditions in euro-denominated securities financing and OTC derivatives marketsAnnexes
- 7 November 2019
-
Other publication
- 7 November 2019
-
Other publication
- 7 November 2019
-
Press releaseRelated
- 7 November 2019
- 7 November 2019
-
Economic Bulletin
- 7 November 2019
-
Economic Bulletin - BoxEconomic Bulletin Issue 7, 2019Details
- Abstract:
- Box about the start of the overnight benchmark rate for euro, the €STR.
- JEL Code:
- E430
- 6 November 2019
- 6 November 2019
-
Working Paper Series - Issue No. 2327Details
- Abstract:
- This paper draws a causal link between the rise of global value chain participation and the decline of exchange rate pass-through to import prices over the last decades. We first present a structural two-country model in order to illustrate how participation in global value chains can impact exchange rate pass-through to import prices. In the model, the sensitivity of an economy's domestic-currency production costs to exchange rate changes rises as it participates more in global value chains by importing a larger share of its intermediate inputs. The increased sensitivity of the economy's domestic-currency production costs to exchange rate changes translates into a higher sensitivity of its domestic-currency export prices. The latter implies a reduction of the sensitivity of the economy's foreign-currency export prices – i.e. its trading partner's local-currency import prices – to exchange rate changes. Hence, an increase in the economy's global value chain participation implies a fall in its trading partner's exchange rate pass-through to import prices. We then provide empirical evidence in a cross-country panel dataset for the time period from 1995 to 2014 that is consistent with the mechanisms spelled out in the structural model. In particular, the data suggest that exchange rate pass-though to export prices is higher in economies which participate more in global value chains, and that exchange rate pass-though to import prices is lower in economies whose trading partners participate more in global value chains. Quantitatively, our estimates imply that the rise in global value chain participation can account for about 50% of the decline in exchange rate pass-through to import prices since the mid-1990s.
- JEL Code:
- F32,F41,F62
- 6 November 2019
-
Press release
- 6 November 2019
-
Other publicationRelated
- 6 November 2019
-
SpeechDetails
- Subtitle:
- Remarks by Luis de Guindos, Vice-President of the ECB, at the ECB Forum on Banking Supervision, Frankfurt am Main, 6 November 2019
- 6 November 2019
-
Economic Bulletin - ArticleEconomic Bulletin Issue 7, 2019Details
- Abstract:
- This article provides a review of the global trends in central banks’ foreign currency reserve holdings in terms of their size, adequacy and composition, before examining the ECB’s foreign currency reserves and how these reserves are managed.
- JEL Code:
- E58,F31,F55,G11,G23,Q02
- 5 November 2019
-
Weekly financial statementAnnexes
- 5 November 2019
-
Weekly financial statement - Commentary
- 5 November 2019
-
Forum on Central Banking - Conference proceedings
- 5 November 2019
-
Press release
- 5 November 2019
-
Other publicationRelated
- 5 November 2019
-
Economic Bulletin - BoxEconomic Bulletin Issue 7, 2019Details
- Abstract:
- This box assesses the current cyclical position of the euro area labour market by means of a stylised tracer for employment and output fluctuations using the Purchasing Managers’ Index (PMI) survey data. This tracer points towards a slowdown in the labour market since February 2018, with the services sector continuing to support employment growth in the euro area, while manufacturing employment has been in a downturn since May 2019. A more granular approach suggests the weakness in manufacturing is more prevalent in the capital goods and motor vehicles industries, while the resilience of the services sector is perceived to be broad-based across industries. Looking ahead downward risks stemming from the transmission of the weakness in manufacturing to the services sector may arise, strengthening the need for close monitoring of the euro area labour market.
- JEL Code:
- E24
- 4 November 2019
-
SpeechDetails
- Subtitle:
- Laudatory speech by Christine Lagarde, President of the ECB, for Dr Wolfgang Schäuble at the VdZ Publishers’ Night, Berlin, 4 November 2019
- 4 November 2019
-
Working Paper Series - Issue No. 2326Details
- Abstract:
- We empirically analyse the relationship between longer term central bank liquidity support and banks’ balance sheet ratios, using difference-in-differences panel regressions and propensity score matching on a large sample of banks in the euro area. The research question is whether the liquidity operations, which were introduced to prevent disorderly deleveraging, can also be linked to unintended changes in banks’ funding policies and asset allocations. The results show that unconditional and conditional refinancing operations are associated with different developments on banks’ balance sheets. Unconditional longer-term refinancing operations went together with higher maturity transformation by banks in stressed countries, and also more carry trades, i.e. banks borrowing more while increasing their holdings of government bonds. In contrast, refinancing operations that were conditional on banks’ lending were not associated with such carry trades, highlighting the benefits of conditionality attached to long-term refinancing operations.
- JEL Code:
- E51,G21,G32
- 4 November 2019
-
Working Paper Series - Issue No. 2325Details
- Abstract:
- Time-varying parameter (TVP) models have the potential to be over-parameterized, particularly when the number of variables in the model is large. Global-local priors are increasingly used to induce shrinkage in such models. But the estimates produced by these priors can still have appreciable uncertainty. Sparsification has the potential to remove this uncertainty and improve forecasts. In this paper, we develop computationally simple methods which both shrink and sparsify TVP models. In a simulated data exercise we show the benefits of our shrink-then-sparsify approach in a variety of sparse and dense TVP regressions. In a macroeconomic forecast exercise, we find our approach to substantially improve forecast performance relative to shrinkage alone.
- JEL Code:
- C11,C30,E3,D31
- 4 November 2019
-
Economic Bulletin - BoxEconomic Bulletin Issue 7, 2019Details
- Abstract:
- This box summarises the findings of an ad hoc ECB survey of leading euro area companies about their price-setting behaviour, covering various dimensions. Among the findings, it was seen that firms mostly vary their prices by geographical market and by type of customer, but much less so depending on the sales platform. The frequency of price reviews and changes varies significantly across sectors, with weekly or even daily price changes being common for some retailers, while in some parts of the services sector annual price changes are more typical. Manufacturers tend to review prices monthly but change them only on a quarterly, semi-annual or annual basis. Increases in average selling prices are achieved, to a large extent, by introducing new products with higher value content. When reviewing prices, firms pay most attention to costs and competitor prices, with the latter being particularly important for consumer-facing firms. Many factors contribute to sluggish price adjustment: pricing strategies are based on broadly stable costs and margins, a fear that competitors will not follow suit and, for consumer-oriented firms, a focus on pricing points and an understanding that customers expect prices to remain stable.
- JEL Code:
- D4,E3,L1
- 4 November 2019
-
Economic Bulletin - BoxEconomic Bulletin Issue 7, 2019Details
- Abstract:
- Euro area growth has weakened, and economic indicators point to slow growth in coming quarters. This mainly reflects the ongoing weakness in international trade – in an environment of elevated global uncertainties – and its impact on the manufacturing sector. Activity levels in the services sector, by contrast, have remained relatively resilient. However, this raises questions about the extent to which there could be spillovers from the manufacturing sector to the services sector in the future. An analysis of the relationship between manufacturing and various sub-groups of the services sector shows that non-market services exhibit a weak co-movement with the cyclical developments in manufacturing. In contrast, market services and business services tend to move with manufacturing, but as yet there is limited evidence that the recent slowdown in manufacturing has been transmitted to these parts of the economy. This is likely to stem from the resilient developments in domestic demand, supported by the very accommodative monetary policy stance, which continues to support labour markets and create favourable financing conditions.
- JEL Code:
- A10,E32
- 1 November 2019
-
Press release
- 31 October 2019
-
Working Paper Series - Issue No. 2324Details
- Abstract:
- We investigate the relationship between hours per worker and employment polarisation. Our core question is whether hours per worker follow the same polarisation patterns as previously observed for employment, measured by either heads or total hours. Using the occupational task index measures of Acemoglu and Autor (2011), we find large relative declines in hours per worker in routine manual jobs – precisely the occupations most negatively affected by employment polarisation from routine-biased technical change. We also find a lower relative decline in hours per worker for non-routine cognitive analytical jobs, which are growing through polarisation. At the same time, hours per worker declined significantly more than the trend for non-routine manual physical occupations. Instead of a polarisation pattern, we find that hours per worker have been declining more in manual jobs (routine manual and non-routine manual physical). These patterns are observed across age, gender and education groups, with few exceptions and changes in intensity. The decline in hours per worker occurred mostly within sectors. Using a wage ranking of occupations instead of occupational task indices, the decline in hours per worker is monotonically related to wages. The results are specific to the European countries and the same patterns are not found using data for the United States.
- JEL Code:
- J23,J24,O33
- 31 October 2019
-
Working Paper Series - Issue No. 2323Details
- Abstract:
- This paper presents a model for stress testing investment funds, based on a broad worldwide sample of primary open-end equity and bond funds. First, we employ a Bayesian technique to project the impact of macro-financial scenarios on country-level portfolio flows worldwide that are constructed from fund-level asset holdings. Second, from these projected country-level flows, we model the scenarios’ repercussions on individual funds along a three year horizon. Importantly, we further decompose portfolio flows, disentangling the specific contributions of transactions, valuation and foreign exchange effects. Overall, our results indicate that the impact of a global adverse macro-financial scenario leads to a median depletion in assets under management (AUM) of 24% and 5%, for euro area-domiciled equity and bond funds respectively, largely driven by valuation effects. Scenario and results both present similarities to the global financial crisis. We use historical information on fund liquidations to estimate a threshold for a drop in AUM that signals a high likelihood of a forthcoming liquidation. Based on this, we estimate that 5.8% and 0.5% of euro area-domiciled equity and bond funds respectively could go into liquidation. Such empirical thresholds can be useful for the implementation of prudential policy tools, such as redemption gates.
- JEL Code:
- F21,G15,G17,G23,G28
- 31 October 2019
-
MFI interest rate statistics
- 30 October 2019
-
SpeechDetails
- Subtitle:
- Speech by Sabine Lautenschläger, Member of the Executive Board of the ECB, at lecture series “Mein Europa”, Heinrich-Heine University
- 29 October 2019
-
Macroprudential Bulletin - Article - Issue No. 9Details
- Abstract:
- The post-crisis regulatory framework introduced multiple requirements on banks’ capital and liquidity positions, sparking a discussion among policymakers and academics on how the various requirements interact with one another. This article contributes to the discussion on the interaction of different regulatory metrics by empirically examining the interaction between the liquidity coverage ratio (LCR) and the net stable funding ratio (NSFR) for banks in the euro area. The findings suggest that the two liquidity requirements are complementary and constrain different types of banks in different ways, similarly to the risk-based and leverage ratio requirements in the capital framework. This dispels claims that the LCR and the NSFR are redundant and underlines the need for a faithful and consistent implementation of both measures (and the entire Basel III package more broadly) across all major jurisdictions, to maintain a level playing field at the global level and to ensure that the post-crisis regulatory framework delivers on its objectives.
- JEL Code:
- G01,G18,G21,G28
- 29 October 2019
-
Macroprudential Bulletin - Annex - Issue No. 9
- 29 October 2019
-
Macroprudential Bulletin - Article - Issue No. 9Details
- Abstract:
- Initial margin (IM) reduces counterparty credit risk in derivative markets. Notwithstanding efforts to limit potential procyclical effects of IM-setting practices, there is an ongoing debate about whether the current framework sufficiently addresses this concern, in particular when Value-at-Risk (VaR) models are used for setting IM. This article provides further insights into this issue. First, using EMIR data, we provide an overview of outstanding IM in the euro area derivative market and identify the most relevant sectors for the exchange of IM. Second, using a VaR IM model in line with industry practice, we show that aggregate IM can potentially vary substantially over a long-term horizon. Finally, we show that an IM floor based on a standardised IM model could be an effective tool for reducing IM procyclicality.
- JEL Code:
- G10,G23,G28
- 29 October 2019
-
Macroprudential Bulletin - Article - Issue No. 9Details
- Abstract:
- A recent ECB study shows that leverage is an important driver in investors’ redemption decisions. Regulatory changes to the UCITS framework facilitated the use of derivatives, increasing leverage for some European mutual funds which amplified investors' responsiveness to negative returns in a procyclical manner.
- JEL Code:
- G01,G23,G28
- 29 October 2019
-
Macroprudential Bulletin - Article - Issue No. 9Details
- Abstract:
- This article aims to contribute to the ongoing discussion about the long-term strategy for stress testing in the euro area. In particular, it highlights some of the strengths and weaknesses of the constrained bottom-up approach, which is currently used in the EU‑wide stress-testing exercise. Under this approach, banks use their own models to generate stress test projections on the basis of a common macroeconomic scenario and under the constraints imposed by the European Banking Authority methodology. This set-up provides banks with some scope to underestimate their vulnerabilities in order to appear more resilient than their peers. This article confirms previous empirical evidence showing that such behaviour may indeed be practised by banks. This, in turn, requires a robust quality assurance of banks’ stress test projections by the competent authorities (including the European Central Bank), to enforce more realistic results. Against this background, the article presents a novel empirical analysis providing indicative evidence that the “supervisory scrutiny” relating to the quality assurance may be having a disciplining effect on banks’ risk-taking.
- JEL Code:
- G21,G28
- 29 October 2019
-
Macroprudential Bulletin - Article - Issue No. 9Details
- Abstract:
- Cyclical systemic risk tends to build up well ahead of financial crises and is measured best by credit and asset price dynamics. This article shows that high levels of cyclical systemic risk lead to large downside risks to the bank-level return on assets three to five years ahead. Hence, exuberant credit and asset price dynamics tend to increase considerably the likelihood of large future bank losses. Given the tight link between bank losses and reductions in bank capital, the results presented in this article can be used to quantify the level of “Bank capital-at-risk” (BCaR) for a banking system. BCaR is a useful tool for macroprudential policy makers as it helps to quantify how much additional bank resilience could be needed if imbalances unwind and systemic risk materialises.
- JEL Code:
- G01,G17,C22,C54,G21
- 29 October 2019
-
Macroprudential Bulletin - Foreword - Issue No. 9
- 29 October 2019
-
Weekly financial statementAnnexes
- 29 October 2019
-
Weekly financial statement - Commentary
- 29 October 2019
-
Euro area economic and financial developments by institutional sector (full)
- 28 October 2019
-
SpeechDetails
- Subtitle:
- Remarks by Mario Draghi, President of the ECB, at the farewell event in his honour
- 28 October 2019
-
Working Paper Series - Issue No. 2322Details
- Abstract:
- Why do residential mortgages carry a fixed or an adjustable interest rate? To answer this question we study unique data from 103 banks belonging to 73 different banking groups across twelve countries in the euro area. To explain the large cross-country and time variation observed, we distinguish between the conditions that determine the local demand for credit and the characteristics of banks that supply credit. As bank funding mostly occurs at the group level, we disentangle these two sets of factors by comparing the outcomes observed for the same banking group across the different countries. Local demand conditions dominate. In particular we find that the share of new loans with a fixed rate is larger when: (1) the historical volatility of inflation is lower, (2) the correlation between unemployment and the short-term interest rate is higher, (3) households' financial literacy is lower, and (4) the use of local mortgages to back covered bonds and mortgage-backed securities is more widespread.
- JEL Code:
- F23,G21,G41
- 28 October 2019
-
Monetary developments in the euro area
- 26 October 2019
-
InterviewDetails
- Subtitle:
- Interview with Luis de Guindos, Vice-President of the ECB, conducted by Luis Doncel on 11 October 2019
- 25 October 2019
-
Governing Council decisions - Other decisions
- 25 October 2019
-
Legal Working Paper Series - Issue No. 19Details
- Abstract:
- The five contributions in this legal working paper discuss various aspects of investment arbitration. They were originally presented at the ECB legal colloquium on ‘The new challenges raised by investment arbitration for the EU legal order’ which took place in Frankfurt am Main in 2019.
- 25 October 2019
- 25 October 2019
-
Press releaseRelated
- 25 October 2019
-
Survey of Professional Forecasters
- 25 October 2019
-
Survey of Professional ForecastersAnnexes
- 25 October 2019
Related- 25 October 2019
- 24 October 2019
-
Monetary policy statementDetails
- Subtitle:
- Mario Draghi, President of the ECB, Luis de Guindos, Vice-President of the ECB, Frankfurt am Main, 24 October 2019
- 24 October 2019
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Monetary policy decision
- 23 October 2019
- 22 October 2019
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Weekly financial statementAnnexes
- 22 October 2019
-
Weekly financial statement - Commentary
- 22 October 2019
-
Euro area bank lending survey - Issue No. 2019Annexes
- 22 October 2019
-
Euro area bank lending survey - Annex
Related- 22 October 2019
- 22 October 2019
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Press releaseRelated
- 22 October 2019
-
Euro area bank lending survey - Issue No. 2019
- 20 October 2019
-
Environmental Statement - Issue No. 2019Annexes
- 7 October 2020
-
Environmental Statement
- 26 July 2021
-
Environmental Statement
- 18 October 2019
-
SpeechDetails
- Subtitle:
- Statement by Mario Draghi, President of the ECB, at the fortieth meeting of the International Monetary and Financial Committee
- 18 October 2019
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Balance of payments (monthly)
- 17 October 2019
-
SpeechDetails
- Subtitle:
- Speaking notes by Luis de Guindos, Vice-President of the ECB, at roundtable event on climate-related risks at Bloomberg
- 17 October 2019
-
InterviewDetails
- Subtitle:
- Interview with Benoît Cœuré, Member of the Executive Board of the ECB, conducted by Jana Randow and Piotr Skolimowski on 10 October and published on 17 October 2019
- 17 October 2019
- 17 October 2019
- 16 October 2019
-
SpeechDetails
- Subtitle:
- Presentation by Philip R. Lane, Member of the Executive Board of the ECB, at Brookings Institution in Washington DC
- 16 October 2019
-
Occasional Paper Series - Issue No. 235Details
- Abstract:
- Conditionality is at the very heart of IMF lending and has been the subject of intense debates ever since the Fund’s inception. Its success is of crucial importance not only for countries’ chances of achieving the goals of IMF lending programmes, but also for the credibility of the Fund as a trusted adviser. This report provides information and a set of facts on the IMF arrangements approved after the global financial crisis, with a focus on ex post conditionality and on arrangements primarily financed through the General Resources Account (GRA). The analysis shows that between 2008 and 2018, the characteristics of IMF programmes evolved with the macroeconomic context; in particular, a tendency towards more structural conditionality and longer programme implementation horizons has emerged. In the aftermath of an IMF programme, all relevant macroeconomic variables tend to improve compared with the pre-programme period; in particular, external and fiscal positions improve considerably and growth typically rebounds, inflation declines and net private capital inflows stabilise or recover slightly. However, the improvement has generally fallen short of expectations, especially in terms of GDP growth and debt reduction. One area in which the effectiveness of IMF programmes has proven less than satisfactory is with serial borrowers, i.e. countries that fail to graduate from IMF financial assistance in due course. This highlights the importance of further analysing the factors behind the success of IMF programmes and points, inter alia, to the need to design and sequence the structural conditions attached to Fund loans more effectively
- JEL Code:
- F3,F5
- 15 October 2019
-
Weekly financial statementAnnexes
- 15 October 2019
-
Weekly financial statement - Commentary
- 14 October 2019
-
Research Bulletin - Issue No. 63The gender promotion gap: what holds back female economists from making a career in central banking?Details
- Abstract:
- The underrepresentation of women in economics is perhaps nowhere as visible as in central banks. This Research Bulletin article uses anonymised personnel data to analyse the career progression of men and women at the European Central Bank (ECB). Women were less likely to be promoted up until 2010, when the ECB issued a statement supporting diversity and took measures to support gender balance. Following this change, the promotion gap disappeared. This masked a lower probability of women applying for promotion, which is partially explained by an aversion to competing, combined with a higher probability of being selected after having applied. Following promotion, women performed better in terms of salary progression, suggesting that the higher probability of being selected is based on merit, not positive discrimination. Thus, organisations such as the ECB should provide training and services that target the competition-related reasons that discourage women from applying for promotion.
- JEL Code:
- D20,J16,J13,L20,M50
- 11 October 2019
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SpeechDetails
- Subtitle:
- Remarks by Luis de Guindos, Vice-President of the ECB, on the occasion of the award of the Bernácer Prize to Professor Gabriel Zucman
- 11 October 2019
-
SpeechDetails
- Subtitle:
- Acceptance speech by Mario Draghi, President of the ECB, for the Laurea Honoris Causa from the Università Cattolica
- 11 October 2019
-
Euro area securities issues statistics
- 10 October 2019
-
Monetary policy account
- 9 October 2019
-
Weekly financial statementAnnexes
- 9 October 2019
-
Weekly financial statement - Commentary
- 9 October 2019
-
InterviewDetails
- Subtitle:
- Interview with Luis de Guindos, Vice-President of the ECB, conducted by Luke Heighton on 7 October, and published on 9 October 2019
- 8 October 2019
-
Euro money market statistics
- 7 October 2019
-
Survey of Monetary Analysts
- 4 October 2019
-
Working Paper Series - Issue No. 2321Details
- Abstract:
- A large share of global trade being priced and invoiced primarily in US dollar rather than the exporter’s or the importer’s currency has important implications for the transmission of shocks. We introduce this “dominant currency pricing” (DCP) into ECB-Global, the ECB’s macroeconomic model for the global economy. To our knowledge, this is the first attempt to incorporate DCP into a major global macroeconomic model used at central banks or international organisations. In ECB-Global, DCP affects in particular the role of expenditure-switching and the US dollar exchange rate for spillovers: In case of a shock in a non-US economy that alters the value of its currency multilaterally, expenditure-switching occurs only through imports; in case of a US shock that alters the value of the US dollar multilaterally, expenditure-switching occurs both in non-US economies’ imports and – as these are imports of their trading partners – exports. Overall, under DCP the US dollar exchange rate is a major driver of global trade, even for transactions that do not involve the US. In order to illustrate the usefulness of ECB-Global and DCP for policy analysis, we explore the implications of the euro rivaling the US dollar as a second dominant currency in global trade. According to ECB-Global, in such a scenario the global spillovers from US shocks are smaller, while those from euro area shocks are amplified; domestic euro area monetary policy effectiveness is hardly affected by the euro becoming a second globally dominant currency in trade.
- JEL Code:
- F42,E52,C50
- 4 October 2019
-
Working Paper Series - Issue No. 2320Details
- Abstract:
- We propose a regime-switching approach to deal with the lower bound on nominal interest rates in dynamic term structure modelling. In the “lower bound regime”, the short term rate is expected to remain constant at levels close to the effective lower bound; in the “normal regime”, the short rate interacts with other economic variables in a standard way. State-dependent regime switching probabilities ensure that the likelihood of being in the lower bound regime increases as short rates fall closer to zero. A key advantage of this approach is to capture the gradualism of the monetary policy normalization process following a lower bound episode. The possibility to return to the lower bound regime continues exerting an influence in the early phases of normalization, pulling expected future rates downwards. We apply our model to U.S. data and show that it captures key properties of yields at the lower bound. In spite of its heavier parameterization, the regime-switching model displays a competitive out-of-sample forecasting performance. It can also be used to gauge the risk of a return to the lower bound regime in the future. As of mid-2018, it provides a more benign assessment than alternative measures.
- JEL Code:
- E31,E40,E44,E52,E58,E62,E63
- 4 October 2019
-
Euro area economic and financial developments by institutional sector (early)
- 3 October 2019
-
SpeechDetails
- Subtitle:
- Speech by Luis de Guindos, Vice-President of the ECB, at the Global Interdependence Center Central Banking Series conference
- 2 October 2019
-
SpeechDetails
- Subtitle:
- Remarks by Luis de Guindos, Vice-President of the ECB, at the meeting of the Financial Stability Contact Group
- 2 October 2019
-
MFI interest rate statistics
- 2 October 2019
-
Balance of payments (quarterly)
- 1 October 2019
-
SpeechDetails
- Subtitle:
- Speech by Mario Draghi, President of the ECB, at the Academy of Athens
- 1 October 2019
-
Weekly financial statementAnnexes
- 1 October 2019
-
Weekly financial statement - Commentary
- 1 October 2019
-
SpeechDetails
- Subtitle:
- Speech by Philip R. Lane, Member of the Executive Board of the ECB, at the University of California
- 30 September 2019
-
InterviewDetails
- Subtitle:
- Q&A with Philip R. Lane, Member of the Executive Board of the ECB, conducted by Daniel Burns on 27 September 2019 at Reuters Newsmaker in New York
- 30 September 2019
-
Working Paper Series - Issue No. 2319Details
- Abstract:
- This paper develops composite indicators of financial integration within the euro area for both price-based and quantity-based indicators covering money, bond, equity and banking markets. Prior to aggregation, individual integration indicators are harmonised by applying the probability integral transform. We find that financial integration in Europe increased steadily between 1995 and 2007. The subprime mortgage crisis marked a turning point, bringing about a marked drop in both composite indicators. This fragmentation trend reversed when the European banking union and the ECB's Outright Monetary Transactions Programme were announced in 2012, with financial integration recovering more strongly when measured by price-based indicators. In a growth regression framework, we find that higher financial integration tends to be associated with an increase in per capita real GDP growth in euro area countries. This correlation is found to be stronger the higher a country's growth opportunities.
- JEL Code:
- F36,F43,F45,G01,G15
- 30 September 2019
-
Occasional Paper Series - Issue No. 234Details
- Abstract:
- In some recent studies, the question of the origins of central banking has been revisited, suggesting that beyond Swedish and British central banking, a number of earlier European continental institutions would also have played an important role. However, it has often been difficult to access the charters and regulations of these early central banks – in particular in English. This paper contributes to closing this gap by introducing and providing translations of some charters and regulations of six pre 1800 central banks in France and Germany. The six early public banks displayed varying levels of success and duration, and qualify to a different degree as central banks. An overview table maps the articles of the early central banks’ charters and regulations into key central banking topics. The texts also provide evidence of the role of central banking legislation, and of the distinction between, on the one side, the statutes and charters of the banks, and on the other side the operational aspects which tend to be framed by separate rules and regulations. Finally, the texts provide evidence of the policy objectives of early central banks, including in particular those of a monetary nature. To put these documents into context, the objectives, balance sheet structure, achievements and closure of each central bank are briefly summarised.
- JEL Code:
- E32,E5,N23
- 30 September 2019
-
InterviewDetails
- Subtitle:
- Interview with Mario Draghi, President of the ECB, conducted by Lionel Barber and Claire Jones on 25 June and 20 September, and published on 30 September 2019
- 27 September 2019
-
Press release
- 27 September 2019
-
Governing Council decisions - Other decisions
- 27 September 2019
- 27 September 2019
- 27 September 2019
- 27 September 2019
- 27 September 2019
-
Euro money market - Issue No. 2018Related
- 27 September 2019
-
Press release
- 27 September 2019
-
Press releaseRelated
- 27 September 2019
-
Euro money market - Issue No. 2018
- 26 September 2019
-
InterviewDetails
- Subtitle:
- Interview with Philip R. Lane, Member of the Executive Board of the ECB, conducted by Jan Mallien and Frank Wiebe on 24 September 2019
- 26 September 2019
-
Working Paper Series - Issue No. 2318Details
- Abstract:
- We study the relation between the structure of financial systems and carbon emissions in a large panel of countries and industries over the period 1990-2013. We find that for given levels of economic and financial development and environmental regulation, CO2 emissions per capita are lower in economies that are relatively more equity-funded. Industry-level analysis reveals two distinct channels. First, stock markets reallocate investment towards less polluting sectors. Second, they also push carbon-intensive sectors to develop and implement greener technologies. In line with this second effect, we show that carbon-intensive sectors produce more green patents as stock markets deepen. We also document an increase in carbon emissions associated with the production of imported goods equal to around one-tenth of the reduction in domestic carbon emissions.
- JEL Code:
- G10,O4,Q5
- 26 September 2019
-
Working Paper Series - Issue No. 2317Details
- Abstract:
- This paper investigates the impact of the introduction and implementation of the new EU bail-in framework on the banks subordinated bond yield spreads over senior unsecured bonds, and links the bond yields developments with the characteristics of the issuing entities and the economic and financial environment. The analysis does not show evidence of a significant and generalized increase in the spreads as a result of a higher risk perception in the sample under review. The results reinforce the relevance of the Tier 1 capital ratio for making subordinated debt safer, while markets price the higher risk of banks with less stable sources of funding in their liability/capital structures. Market conditions and economic environment variables also play a key role in explaining bond spreads. Interestingly, after the introduction of the new bail-in framework, there is a convergence between the bond yields of the GSIBs and the non-GSIBs, which could point out to a reduction in the market perception of the so called “too big to fail” public implicit guarantee. Nonetheless, this convergence is mostly driven by the reduction of the yields of bonds issued by banks not categorized as GSIBs, and not by significant increases in the GSIBs’ bond yields.
- JEL Code:
- G12,G14,G28
- 26 September 2019
-
Monetary developments in the euro area
- 26 September 2019
-
Economic Bulletin
- 26 September 2019
-
Economic Bulletin - BoxEconomic Bulletin Issue 6, 2019Details
- Abstract:
- This box describes the ECB’s monetary policy operations during the third and fourth reserve maintenance periods of 2019, which ran from 17 April to 11 June 2019 and from 12 June to 30 July 2019 respectively.
- JEL Code:
- E40,E52,E58
- 26 September 2019
-
Economic Bulletin - BoxEconomic Bulletin Issue 6, 2019Details
- Abstract:
- Profits can account for a significant part of domestic price formation and affect the pass-through of changes in costs to final prices. National accounts contain a broad measure of profits, gross operating surplus, which can tell us more about the role of profits for domestic price pressures, as measured in the GDP deflator. This box illustrates how profits have recently shaped domestic price pressures in the euro area. It explains which factors are the main drivers of the movements in profit margins and discusses how they have likely contributed to their recent developments.
- JEL Code:
- E31,O11
- 26 September 2019
-
Economic Bulletin - BoxEconomic Bulletin Issue 6, 2019Details
- Abstract:
- This box describes the elements and underlying rationale of the Governing Council’s comprehensive policy package decided in September.
- JEL Code:
- E40,E52,E58
- 26 September 2019
-
Research Bulletin - Issue No. 62Details
- Abstract:
- This article studies this question by revisiting the Eurosystem's experience during the euro area sovereign debt crisis between 2010 and 2012. In some instances, the Eurosystem was able to remove excess risk from parts of its balance sheet by extending the scale of its operations, in line with Bagehot's well-known assertion that occasionally "the brave plan is the safe plan."
- JEL Code:
- G21,C33
- Network:
- Research Task Force (RTF)
- 26 September 2019
-
SpeechDetails
- Subtitle:
- Welcome remarks by Mario Draghi, President of the ECB and Chair of the European Systemic Risk Board, at the fourth annual conference of the ESRB
- 25 September 2019
-
Press release
- 25 September 2019
-
Economic Bulletin - BoxEconomic Bulletin Issue 6, 2019Details
- Abstract:
- Evidence suggests that household income risk is an important factor in the propagation of macroeconomic shocks and the transmission of economic policy. An analysis using survey data on income from the euro area suggests that the nature of household income risk in the euro area is comparable with the United States, in that (i) individual earnings risk is closely linked to the performance of the labour market, and (ii) in a downturn it increases much more for some groups of workers than for others. These insights are useful for assessing the current economic outlook and the role of income risk in amplifying macroeconomic shocks.
- JEL Code:
- E20,E21,E24
- 25 September 2019
-
SpeechDetails
- Subtitle:
- Hearing of Benoît Cœuré, Member of the Executive Board of the ECB, organised by the Committee on the Digital Agenda on the topic of “Digital currencies, focusing on Libra”, Deutscher Bundestag
- 24 September 2019
-
SpeechDetails
- Subtitle:
- Speech by Luis de Guindos, Vice-President of the ECB, at the ECB conference “Inflation in a changing economic environment”
- 24 September 2019
-
Weekly financial statementAnnexes
- 24 September 2019
-
Weekly financial statement - Commentary
- 24 September 2019
-
SpeechDetails
- Subtitle:
- Welcome address by Luis de Guindos, Vice-President of the ECB, to the Money Market Contact Group
- 24 September 2019
-
Economic Bulletin - BoxEconomic Bulletin Issue 6, 2019Details
- Abstract:
- This box looks at the current employment expansion in the euro area and compares it with past periods of employment growth. It uses annual data for the period 1960-2018 and shows that: (i) the current employment expansion is so far not particularly lengthy in comparison with past recoveries; (ii) the current employment expansion is more employment-rich than previous expansions as employment growth has been stronger relative to GDP growth than it was in the past; (iii) the fast-paced decline in the unemployment rate has been a notable feature of the current expansion; and (iv) the decline in unemployment and the increase in employment in the current expansion have occurred alongside moderating labour costs, but that moderation has been weaker than in the previous expansion.,(ii) the current employment expansion is more employment-rich than previous expansions as employment growth has been stronger relative to GDP growth than it was in the past,(iii) the fast-paced decline in the unemployment rate has been a notable feature of the current expansion,and (iv) the decline in unemployment and the increase in employment in the current expansion have occurred alongside moderating labour costs, but that moderation has been weaker than in the previous expansion.
- JEL Code:
- E24
- 24 September 2019
-
Economic Bulletin - ArticleEconomic Bulletin Issue 6, 2019Details
- Abstract:
- There is a wide range of instruments which the ECB may use in the area of supervision, reflecting the wide range of different supervisory activities it undertakes. Different kinds of instruments may be useful for different purposes. The present article attempts to bring some order into this multitude of different instruments and to describe their legal implications. The structure of the article is as follows: Section II will discuss legal acts of a binding nature. Section III will discuss, in a broad sense, legally non-binding instruments and documents, some of which qualify, in spite of their non-binding nature, as legal acts. Section IV will address the difficulties in distinguishing between these two categories, which is not always straightforward. Section V will draw some generalising and summarising conclusions.
- JEL Code:
- K23,G21,G18
- 23 September 2019
-
SpeechDetails
- Subtitle:
- Introductory Statement by Mario Draghi, President of the ECB, at the ECON committee of the European Parliament, Brussels, 23 September 2019
Annexes- 27 September 2019
-
Speech
- 23 September 2019
-
Economic Bulletin - BoxEconomic Bulletin Issue 6, 2019Details
- Abstract:
- Using a structural vector autoregression (SVAR) model, the box suggests that the fall in industrial production growth in the euro area in the past year has been driven by both the intensification of global trade tensions and adverse domestic shocks. Whereas in the first half of 2018 weakness in international trade in an environment of global uncertainties was the main contributor to the fall in industrial production, since July 2018 euro area-specific developments have also played a major role.
- JEL Code:
- E32,F44,C50
- 23 September 2019
-
Economic Bulletin - ArticleEconomic Bulletin Issue 6, 2019Details
- Abstract:
- Data on derivatives transactions have recently become available at a number of central banks, including the ECB, and have opened up new avenues for analysis. Collected as a result of reforms of the over-the-counter (OTC) derivatives market, which were primarily designed to counter systemic risk, the data have numerous applications beyond the domain of financial stability. This article presents two such applications. It demonstrates how data gathered under the European Market Infrastructure Regulation (EMIR) can be used to better understand two types of derivatives market that are of particular importance for central bank analysis, namely the interest rate derivatives and inflation-linked swap markets. For the interest rate derivatives market, the article shows how investor expectations for interest rates may be inferred through “positioning indicators” that track how a set of “informed investors” take positions in the market in anticipation of future interest rate movements. Such quantity-based indicators can complement other, more established indicators of interest rate expectations, such as forward rates or survey-based measures. For euro area inflation-linked swap markets, the article exploits the fact that EMIR data allow a first systematic look at trading activity in these markets, which can provide valuable and timely information on investors’ inflation expectations. It highlights a number of structural features of activity in these markets and discusses their possible implications for the monitoring of market-based measures of inflation compensation.
- JEL Code:
- G10,G11,G12
- 19 September 2019
-
InterviewDetails
- Subtitle:
- Q&A with Philip R. Lane, Member of the Executive Board of the ECB, conducted by Stephanie Flanders on 16 September 2019 at Bloomberg in London
- 19 September 2019
-
Balance of payments (monthly)
- 17 September 2019
-
SpeechDetails
- Subtitle:
- Panel remarks by Benoît Cœuré, Member of the Executive Board of the ECB, at the Banque centrale du Luxembourg-Toulouse School of Economics conference on “The Future of the International Monetary System”
- 17 September 2019
-
Weekly financial statementAnnexes
- 17 September 2019
-
Weekly financial statement - Commentary
- 17 September 2019
-
Working Paper Series - Issue No. 2316Details
- Abstract:
- We present a simple model that quantitatively replicates the behavior of stock prices and business cycles in the United States. The business cycle model is standard, except that it features extrapolative belief formation in the stock market, in line with the available survey evidence. Extrapolation amplifies the price effects of technology shocks and - in response to a series of positive technology surprises - gives rise to a large and persistent boom and bust cycle in stock prices. Boom-bust dynamics are more likely when the risk-free interest rate is low because low rates strengthen belief-based amplification. Stock price cycles transmit into the real economy by generating inefficient price signals for the desirability of new investment. The model thus features a 'financial accelerator', despite the absence of financial frictions. The financial accelerator causes the economy to experience persistent periods of over- and under-accumulation of capital.
- JEL Code:
- E32,E44,G12
- 16 September 2019
-
SpeechDetails
- Subtitle:
- Keynote speech by Philip R. Lane, Member of the Executive Board of the ECB, at Bloomberg, London, 16 September 2019
Annexes- 16 September 2019
-
Speech
- 16 September 2019
-
Macroprudential Bulletin - Foreword - Issue No. 8
- 16 September 2019
-
Working Paper Series - Issue No. 2315Details
- Abstract:
- This paper presents the blueprint of a new ECB multi-country model. The version documentedin the following pages is estimated on euro area data. As a prelude to the countrymodels, this version is meant to enhance the understanding of the main model mechanisms,enlarge the suite of area wide tools, and provide a tool for a top down approach betweeneuro area and country modelling. The model converges to a well-de ned steady state and itsproperties are in line with macroeconomic theory and standard empirical benchmarks. Thedesign is aligned to its role as workhorse model in the context of the forecasting and policysimulation exercises at the ECB.
- JEL Code:
- C3,C5,E1,E2,E5
- 16 September 2019
-
Occasional Paper Series - Issue No. 233Details
- Abstract:
- This paper reviews and assesses financial stability challenges in countries preparing for EU membership, i.e. Albania, Bosnia and Herzegovina, Kosovo, Montenegro, North Macedonia, Serbia and Turkey. The paper mainly focuses on the period since 2016 (unless the analysis requires a longer time span) and on the banking sectors that dominate financial systems in this group of countries. For the Western Balkans, the paper analyses recent trends in financial intermediation, as well as the two main challenges that have been identified in the past. Asset quality continues to improve, but the share of non-performing loans is still high in some countries, while regulatory, legal and tax impediments are still to be resolved in most cases. High unofficial euroisation is a source of indirect credit risk for countries with their own national legal tender, which calls for continued efforts to promote the use of domestic currencies in the financial system. At the same time, banking systems seem less prone to financial stress from maturity mismatches than certain EU peers. These risks are met with a solid shock-absorbing capacity in the Western Balkans, as exemplified by robust capital and liquidity buffers. Turkey experienced a period of heightened financial stress during 2018 and, while its banking system appears to have sufficient buffers to absorb shocks overall, significant forex borrowing of corporates and high rollover needs of banks in foreign exchange on the wholesale market constitute considerable financial stability risks.
- JEL Code:
- F31,F34,F36,G15,G21,G28
- 16 September 2019
-
Macroprudential Bulletin - Article - Issue No. 8Details
- Abstract:
- How do changes in bank capital requirements affect bank lending, lending spreads and the broader macroeconomy? The answer to this question is important for calibrating and assessing macroprudential policies. There is, however, relatively little empirical evidence to answer this question in the case of the euro area countries. This article contributes to filling this gap by studying the effects of changes in economic bank capital buffers in the four largest euro area countries. We use bank-level data and macroeconomic information to estimate a bank-internal, target level of economic capital ratio, i.e. the capital ratio that a bank would like to hold considering its own characteristics (size, profitability, risk aversion of its creditors, risk exposure, etc.) and macroeconomic conditions (expected GDP growth, etc.). Economic bank capital buffers are then computed as the difference between the current and the target economic capital ratio. However, due to adjustment costs, banks cannot adjust the actual capital ratio to the target level instantaneously. As a result, a change in the target capital ratio will result in an instantaneous change in the economic capital buffer. These buffers are aggregated at the country level and included in a panel Bayesian vector auto regressive (VAR) model. With the VAR, it is then possible to compute the response of macroeconomic and banking variables to a change in the buffer. The idea is that changes in economic capital buffers mimic the effects a change in regulatory capital requirements would have on the economy. We find that a negative economic capital buffer shock, i.e. a decline in actual capital ratios below the target level, leads to a modest decline in output and prices and to a larger decline in bank lending growth. By affecting the difference between actual and target economic capital ratios, these findings suggest that countercyclical capital-based macroprudential policy measures can be useful to dampen the financial cycle.
- JEL Code:
- C11,E58,G21
- 16 September 2019
-
Macroprudential Bulletin - Article - Issue No. 8Details
- Abstract:
- The expansion of the EU macroprudential toolkit to also include capital buffers applied at sectoral level may require the cross-border recognition of these instruments. This article explores the relevance of sectoral cross-border credit provided via foreign branches or direct cross-border lending in the SSM area and analyses the effects of the implementation of mandatory reciprocity arrangements. Our findings provide some evidence supporting the introduction of mandatory reciprocity arrangements for sectoral capital buffers where exposures are material in order to ensure a level playing field and pre-empt future leakages. This is important to foster the effectiveness of macroprudential policies because financial services provided via foreign branches or direct cross-border exposures would otherwise not be subject to a macroprudential measure taken in a host Member State.
- JEL Code:
- C68,E58,G21,G28
- 16 September 2019
-
Macroprudential Bulletin - Article - Issue No. 8Details
- Abstract:
- As discussions progress on the potential design of sectoral capital buffers both at the Basel Committee on Banking Supervision (BCBS) and European levels, this article discusses the advantages and shortcomings of the sectoral application of the countercyclical capital buffer for addressing sectoral systemic risks. A dynamic stochastic general equilibrium (DGSE) model is used to explore and compare the transmission channels of the countercyclical capital buffer (CCyB) and the sectoral countercyclical capital buffer (SCCyB), as well as their role in enhancing the resilience of banks and taming the procyclicality of credit. The model-based policy exercise indicates that, if risks are confined to one particular credit sector, a SCCyB could prove more effective than the CCyB in strengthening bank resilience to the target sector and in mitigating sectoral credit imbalances.
- JEL Code:
- C68,E58,G01,G21,G28
- 13 September 2019
-
Other publicationDetails
- Subtitle:
- Selected validation checks performed in AnaCredit datasets
- 12 September 2019
- 12 September 2019
- 12 September 2019
- 12 September 2019
-
Macroeconomic projections for the euro areaAnnexes
- 12 September 2019
-
Monetary policy statementDetails
- Subtitle:
- Mario Draghi, President of the ECB, Luis de Guindos, Vice-President of the ECB, Frankfurt am Main, 12 September 2019
- 12 September 2019
-
Monetary policy decision
- 11 September 2019
-
Euro area securities issues statistics
- 10 September 2019
-
Weekly financial statementAnnexes
- 10 September 2019
-
Weekly financial statement - Commentary
- 7 September 2019
-
SpeechDetails
- Subtitle:
- Panel contribution by Luis de Guindos, Vice-President of the ECB, at The European House-Ambrosetti Forum, Cernobbio, 7 September 2019
- 4 September 2019
-
SpeechDetails
- Subtitle:
- Keynote speech by Luis de Guindos, Vice-President of the ECB, at the annual US-EU Symposium organised by the Program on International Financial Systems, Frankfurt, 4 September 2019
- 4 September 2019
-
SpeechDetails
- Subtitle:
- Appointment hearing of Yves Mersch, Member of the Executive Board of the ECB, at the Committee on Economic and Monetary Affairs of the European Parliament, Brussels, 4 September 2019
- 4 September 2019
-
SpeechDetails
- Subtitle:
- Keynote lecture by Philip R. Lane, Member of the Executive Board of the ECB, at the 50th anniversary conference of The Money, Macro and Finance Research Group, London, 4 September 2019
- 4 September 2019
-
Working Paper Series - Issue No. 2314Details
- Abstract:
- Using a representative sample of businesses in the euro area, we show that Eurosystempurchases of corporate bonds under the Corporate Sector Purchase programme (CSPP)increased the net issuance of debt securities, triggering a shift in bank loan supply infavour of firms that do not have access to bond-based financing. Identification comes frommatching bank-dependent firms to their lenders and accounting for the effect of CSPPon banks’ activity in the syndicated loan market. In a difference-in-differences setting,we show that credit access improved relatively more for firms borrowing from banksrelatively more exposed to CSPP-eligible firms. Unlike in previous studies, this resultapplies regardless of bank balance sheet quality as measured by Tier 1 and NPL ratios.
- JEL Code:
- E52,E58,G01,G21,G28
- 4 September 2019
-
Working Paper Series - Issue No. 2313Details
- Abstract:
- Euro area governments have committed to break the doom loop between banks and sovereigns.But policymakers disagree on how to treat sovereign exposures in bank regulation. Our contributionis to model endogenous sovereign portfolio reallocation by banks in response toregulatory reform. Simulations highlight a tension between concentration and credit risk inportfolio reallocation. Resolving this tension requires regulatory reform to be complementedby an expansion in the portfolio opportunity set to include an area-wide low-risk asset. Byreinvesting into such an asset, banks would reduce both their concentration and credit riskexposure.
- JEL Code:
- G01,G11,G21,G28
- 3 September 2019
-
Weekly financial statementAnnexes
- 3 September 2019
-
Weekly financial statement - Commentary
- 3 September 2019
-
Occasional Paper Series - Issue No. 232Details
- Abstract:
- Despite notable improvements in the labour market since 2013, wage growth in the euro area was subdued and substantially overpredicted in 2013-17. This paper summarises the findings of an ESCB expert group on the reasons for low wage growth and provides comparable analyses on wage developments in the euro area as a whole and in individual EU countries. The paper finds that cyclical drivers, as captured by a standard Phillips curve, seem to explain much of the weakness in wage growth during this period, but not all of it. Going beyond the drivers included in standard Phillips curves, other factors are also found to have played a role, such as compositional effects, the possible non-linear reaction of wage growth to cyclical improvements, and structural and institutional factors. In order to increase the robustness of wage forecasts, the paper also proposes ready-to-use tools for cross-checking euro area wage growth forecasts based on wage Phillips curves. These are derived based on a comprehensive real-time forecast evaluation exercise
- JEL Code:
- J30,E24,E31,E32
- 3 September 2019
-
MFI interest rate statistics
- 2 September 2019
-
Forum on Central Banking - Conference proceedings
- 2 September 2019
-
Working Paper Series - Issue No. 2312Details
- Abstract:
- Macroeconomic studies suggest that employment-output elasticities in the euro area increased during the recovery from the crisis, especially in those countries that implemented reforms. In this paper, we use micro (individual-level) data from the Eurostat Labour Force Survey to investigate whether a similar change can be found at the micro level. We estimate the probabilities of worker flows across employment and unemployment in euro area countries during the period 2000-2015 in response to GDP growth, structural reforms and individual socio-demographic characteristics. We find evidence of a higher responsiveness of individual worker flows to output changes after the crisis, particularly for a group of countries which implemented significant reforms during the crisis. Indicators of labour and product market rigidities provide a statistically significant direct indication that such increased responsiveness may be explained by reforms. Finally, our results are not only driven by workers hired on temporary contracts, but also apply to permanent contracts.
- JEL Code:
- J21,J24,C25,K31
- 2 September 2019
-
Euro area insurance corporations statistics
- 2 September 2019
-
SpeechDetails
- Subtitle:
- Speech by Yves Mersch, Member of the Executive Board of the ECB, at the ECB Legal Conference, Frankfurt am Main, 2 September 2019
- 30 August 2019
-
Occasional Paper Series - Issue No. 231Details
- Abstract:
- This paper reviews developments in fiscal rules in the European Union (EU) from the entering into force of the Treaty on European Union (the “Maastricht Treaty”), which laid the foundations for the euro, until today. It seems safe to say that fiscal positions in the EU and the euro area are now more favourable than they would have been in the absence of the Maastricht Treaty and the Stability and Growth Pact (SGP). However, the aggregate picture masks significant cross-country heterogeneity, with less progress where it would be needed most. Furthermore, the design of the rules has not always followed economic logic and has often been the product of political constraints, giving rise to some flaws in the framework from the outset. Repeated attempts to adjust the fiscal framework to a multitude of circumstances over the past 25 years have made it overly complex and incoherent. The paper concludes that, in its current shape, the SGP is an insufficient disciplining device in economic good times, with the consequence that there are no fiscal buffers, particularly in high-debt countries, to support growth in economic troughs. This, together with the absence of a central fiscal stabilisation instrument, puts the burden of stabilisation mostly on the single monetary policy. The paper also reviews reform options on how to render the fiscal framework more effective in bringing about sounder public finances and avoiding the procyclicality observed over the past two decades.
- JEL Code:
- H11,H50,H6
- 30 August 2019
-
InterviewDetails
- Subtitle:
- Interview with Sabine Lautenschläger, Member of the Executive Board of the ECB, conducted by Luke Heighton on 28 August, and published on 30 August 2019
- 29 August 2019
-
Occasional Paper Series - Issue No. 230Details
- Abstract:
- Stablecoins claim to stabilise the value of major currencies in the volatile crypto-asset market. This paper describes the often complex functioning of different types of stablecoins and proposes a taxonomy of stablecoin initiatives. To this end it relies on a novel framework for their classification, based on the key dimensions that matter for crypto-assets, namely: (i) accountability of issuer, (ii) decentralisation of responsibilities, and (iii) what underpins the value of the asset. The analysis of different types of stablecoins shows a trade-off between the novelty of the stabilisation mechanism used in an initiative (from mirroring the traditional electronic money approach to the alleged introduction of an “algorithmic central bank”) and its capacity to maintain a stable market value. While relatively less innovative stablecoins could provide a solution to users seeking a stable store of value, especially if legitimised by the adherence to standards that are typical of payment services, the jury is still out on the potential future role of more innovative stablecoins outside their core user base.
- JEL Code:
- E42,L17,O33
- 28 August 2019
-
Monetary developments in the euro area
- 27 August 2019
-
Weekly financial statementAnnexes
- 27 August 2019
-
Weekly financial statement - Commentary
- 27 August 2019
-
SpeechDetails
- Subtitle:
- Intervention by Luis de Guindos, Vice-President of the ECB, at the ECB policy panel of the Annual Congress of the European Economic Association, Manchester, 27 August 2019
- 26 August 2019
-
Survey of Monetary Analysts
- 23 August 2019
-
Working Paper Series - Issue No. 2311Details
- Abstract:
- This paper investigates the effects of interbank rate uncertainty on lending rates to euro area firms. We introduce a novel measure of interbank rate uncertainty, computed as the cross-sectional dispersion in interbank market rates on overnight unsecured loans. Using proprietary bank-level data, we find that interbank rate uncertainty significantly raises lending rates on loans to firms, with a peak effect of around 100 basis points during the 2007-2009 global financial crisis and the 2010-2012 European sovereign crisis. This effect is attenuated for banks with lower credit risk, sounder capital positions and greater access to central bank funding.
- JEL Code:
- E44,D80,G21
- Network:
- Research Task Force (RTF)
- 23 August 2019
-
Occasional Paper Series - Issue No. 229Details
- Abstract:
- As a result of technological advancements, instant delivery of digital services has become the norm in today’s society. Yet, until recently, this trend did not extend to retail payment services, which normally took one or up to a few working days from the end user's perspective. Following Europe’s recent launch of its own SEPA-wide instant payment platform, now is the time to ask the question: will instant payment services become “the new normal” and what would this new normal look like? This paper assesses the overall prospects of instant payments in the euro area. It identifies structural drivers and blockers to the adoption of instant payments based on the analysis of country cases where instant payments became operational in the last few years.
- JEL Code:
- E41,E42,E58
- 22 August 2019
-
Monetary policy account
- 21 August 2019
-
Working Paper Series - Issue No. 2310Details
- Abstract:
- We present non-linear models to capture the turning points in global economic activity as well as in advanced and emerging economies from 1980 to 2017. We first estimate Markov Switching models within a univariate framework. These models support the relevance of three business cycle regimes (recessions, low growth and high growth) for economic activity at the global level and in advanced and emerging economies. In a second part, we find that the regimes of the Markov Switching models can be well explained with activity, survey and commodity price variables within a discrete choice framework, specifically multinomial logit models, therefore reinforcing the economic interpretation of the regimes.
- JEL Code:
- C34,C35,E32
- 21 August 2019
- 20 August 2019
-
Weekly financial statementAnnexes
- 20 August 2019
-
Weekly financial statement - Commentary
- 20 August 2019
-
Euro money market statistics
- 19 August 2019
-
Press releaseRelated
- 19 August 2019
-
Other publicationRelated
- 19 August 2019
-
Balance of payments (monthly)
- 16 August 2019
-
Working Paper Series - Issue No. 2309Details
- Abstract:
- We focus on the implications of the shale oil boom for the global supply of oil. We begin with a stylized model with two producers, one facing low production costs and one higher production costs but potentially lower adjustment costs, competing à la Stackelberg. We find that the supply function is flatter for the high cost producer, and that the supply function for shale oil producers becomes more responsive to demand shocks when adjustment costs decline. On the empirical side, we apply an instrumental variable approach using estimates of demand-driven oil price changes derived from a standard structural VAR of the oil market. A main finding is that global oil supply is rather vertical, practically all the time. Moreover, for the global oil market as a whole, we do not find evidence of a major shift to a more price elastic supply as a result of the shale oil boom.
- JEL Code:
- Q33,Q41,Q43,C32
- 16 August 2019
-
Euro area investment fund statistics
- 16 August 2019
-
Euro area financial vehicle corporation statistics
- 15 August 2019
-
Press release
- 14 August 2019
-
Working Paper Series - Issue No. 2308Details
- Abstract:
- Different export-pricing currency paradigms have different implications for a host of issues that are critical for policymakers such as business cycle co-movement, optimal monetary policy, optimum currency areas and international monetary policy co-ordination. Unfortunately, the literature has not reached a consensus on which pricing paradigm best describes the data. Against this background, we test for the empirical relevance of dominant-currency pricing (DCP). Specifically, we first set up a structural three-country New Keynesian dynamic stochastic general equilibrium model which nests DCP, producer-currency pricing (PCP) and local-currency pricing (LCP). In the model, under DCP the output spillovers from shocks that appreciate the US dollar multilaterally decline with an economy’s export-import US dollar pricing share differential, i.e. the difference between the share of an economy’s exports and imports that are priced in the dominant currency. Underlying this prediction is a change in an economy’s net exports in response to multilateral changes in the US dollar exchange rate that arises because of differences in the extent to which exports and imports are priced in the dominant currency. We then confront this prediction of DCP with the data in a sample of up to 46 advanced and emerging market economies for the time period from 1995 to 2018. Specifically, controlling for other cross-border transmission channels, we document that consistent with the prediction from DCP the output spillovers from US dollar appreciation correlate negatively with recipient economies’ export-import US dollar invoicing share differentials. We document that these findings are robust to considering US demand, US monetary policy and exogenous exchange rate shocks as a trigger of US dollar appreciation, as well as to accounting for the role of commodity trade in US dollar invoicing.
- JEL Code:
- F42,E52,C50
- 14 August 2019
-
Working Paper Series - Issue No. 2307Details
- Abstract:
- This paper proposes mixed-frequency distributed-lag (MFDL) estimators of impulse response functions (IRFs) in a setup where (i) the shock of interest is observed, (ii) the impact variable of interest is observed at a lower frequency (as a temporally aggregated or sequentially sampled variable), (iii) the data generating process (DGP) is given by a VAR model at the frequency of the shock, and (iv) the full set of relevant endogenous variables entering the DGP is unknown or unobserved. Consistency and asymptotic normality of the proposed MFDL estimators is established, and their small-sample performance is documented by a set of Monte Carlo experiments. The proposed approach is then applied to estimate the daily pass-through of changes in crude oil prices observed at the daily frequency to U.S. gasoline consumer prices observed at the weekly frequency. We find that the pass-through is fast, with about 23% of the crude oil price changes passed through to retail gasoline prices within five working days, representing about 42% of the long-run pass-through.
- JEL Code:
- C22
- 13 August 2019
-
Weekly financial statementAnnexes
- 13 August 2019
-
Weekly financial statement - Commentary
- 12 August 2019
-
Working Paper Series - Issue No. 2306Details
- Abstract:
- Macroeconomic imbalances increase the vulnerability of an economy to adverse shocks, which in turn can lead to crises with severe economic and social costs. We propose an early warning model that predicts such crises. We identify a set of macroeconomic indicators capturing domestic and external imbalances that jointly predict severe recessions (i.e. growth crises) in a multivariate discrete choice framework. The approach allows us to quantify an economy's macroeconomic vulnerabilities at any point in time. In particular, the model would have pointed early on to emerging vulnerabilities in all the euro area countries that registered severe recessions in the years after 2007. We also show that the model can be applied beyond the euro area crisis in that its main results remain robust to changes in assumptions and sample composition.
- JEL Code:
- E37,E44,F47,O52
- 12 August 2019
-
Occasional Paper Series - Issue No. 228Details
- Abstract:
- A US dollar funding premium in the EUR/USD cross currency swap market has been in existence since 2008. Whilst there are many reasons behind this dislocation, since 2014 the divergence in monetary policy between the euro area and the United States has played a growing role. This paper aims at exploring and gaining more insight into the role the Eurosystem’s Expanded Asset purchase Programme (APP) has had in guiding investment and funding decisions and its influence on the cross currency basis. The downward pressure on yields, exerted by the APP, has made euro assets less attractive and has led investors to search for yield abroad. At the same time, the decline in yields and tighter credit spreads have attracted US corporate issuers to the euro market in search of cheaper funding costs. These cross-border flows from issuers and investors have played a strong role in driving the US dollar funding premium. The purpose of this study is to gauge whether these changing trends in cross-border flows have implications for the implementation of the Eurosystem’s APP. Beyond the structural increase in the US dollar funding premium described above, a cyclical component has led to an amplification of the premium over balance sheet reporting dates, due to new bank regulations. This paper also analyses the behaviour of euro area banks in cross currency swap markets over balance sheet reporting dates, using the money market statistical reporting (MMSR) dataset in order to discern whether the increase in the US dollar funding premium at these specific points in time has an adverse impact on the transmission of monetary policy.
- JEL Code:
- D53,E52,G11,G15,G18
- 12 August 2019
-
Euro area securities issues statistics
- 9 August 2019
-
Press releaseAnnexes
- 8 August 2019
-
Other publication
- 8 August 2019
-
Economic Bulletin
- 8 August 2019
-
Economic Bulletin - BoxEconomic Bulletin Issue 5, 2019Details
- Abstract:
- This box examines the fiscal policy recommendations addressed to the euro area countries against the background of downside risks to the outlook for a continued economic expansion. The examination shows that in countries with high levels of government debt, building buffers to strengthen resilience in cyclical downturns remains a priority for fiscal policies. At the same time, countries that have achieved sound fiscal positions could utilise some fiscal space for measures to support economic growth.
- JEL Code:
- E62,H6
- 8 August 2019
-
Economic Bulletin - BoxEconomic Bulletin Issue 5, 2019Details
- Abstract:
- This box examines the country-specific recommendations (CSRs) for economic policies in euro area countries under the 2019 European Semester. Overall, the 2019 CSRs place greater emphasis on investment-enhancing structural policies and financial sector policies. However, continued weak CSR implementation by Member States remains a challenge. The implementation of structural reforms needs to be substantially stepped up to increase the economic resilience and growth potential of the euro area.
- JEL Code:
- E02,E6,F02
- 8 August 2019
-
Economic Bulletin - BoxEconomic Bulletin Issue 9, 2019Details
- Abstract:
- This box shows that the reversal in gross flows of euro area foreign direct investment (FDI) in 2018 was to a large extent due to developments in flows in Luxembourg and the Netherlands, with Ireland and Belgium contributing to a lesser extent. The episode can be explained by the activity of special purpose entities located in these countries and is also likely to be related to the US corporate tax reform.
- JEL Code:
- F32,F38
- 8 August 2019
-
Economic Bulletin - BoxEconomic Bulletin Issue 5, 2019Details
- Abstract:
- Services price inflation tends to be much higher than non-energy goods price inflation. However, the gap between the two has become smaller since the financial crisis. This phenomenon has coincided with the corresponding decline in the gap between unit labour cost growth in the services sector and manufacturing, driven by the decline in unit labour cost growth in the services sector. Overall, the narrowing of the gap between services price inflation and goods price inflation has been a major feature of lower HICP inflation excluding food and energy. However, this measure of underlying inflation would have declined even more had the weight of the services component not changed.
- JEL Code:
- E31,C43,O47
- 7 August 2019
- 7 August 2019
-
Economic Bulletin - ArticleEconomic Bulletin Issue 5, 2019Details
- Abstract:
- At a time of high government indebtedness, low structural economic growth and ageing populations, a key element in today’s policy debate is the role of government in providing its services and distributing resources to society. Government decisions on tax and social benefit systems have an important bearing on macroeconomic performance in the euro area. This article focuses on how social spending on individual households or on the provision of collective goods and services is organised in euro area countries. Choices made concerning the level and structure of social spending are country-specific and reflect societal policy preferences. The aim of this article is to review government social spending across euro area countries and how it has evolved since the pre-crisis period. It also zooms in on the different social insurance systems in euro area countries in terms of pensions and health and looks at spending on education. We devote particular attention to the analysis of pensions, as pensions represent the biggest social spending item in all countries. The article suggests that countries should look for policies and reforms to ensure the sustainability of social spending, especially in view of ageing populations and possible negative economic shocks.
- JEL Code:
- E62,H40,H51,H52,H55
- 7 August 2019
-
Economic Bulletin - ArticleEconomic Bulletin Issue 5, 2019Details
- Abstract:
- This article discusses the crypto-asset phenomenon with a view to understanding its potential risks and enhancing its monitoring. First, it describes the characteristics of the crypto-asset phenomenon, in order to arrive at a clear definition of the scope of monitoring activities. Second, it identifies the primary risks of crypto-assets that warrant continuous monitoring – these risks could affect the stability and efficiency of the financial system and the economy – and outlines the linkages that could cause a risk spillover. Third, the article discusses how, and to what extent, publicly available data allow the identified monitoring needs to be met and, by providing some examples of indicators on market developments, offers insights into selected issues, such as the availability and reliability of data. Finally, it covers selected statistical initiatives that attempt to overcome outstanding challenges.
- JEL Code:
- E42,G21,G23,O33,C18
- 6 August 2019
-
Weekly financial statementAnnexes
- 6 August 2019
-
Weekly financial statement - Commentary
- 6 August 2019
-
Economic Bulletin - BoxEconomic Bulletin Issue 5, 2019Details
- Abstract:
- This box presents a model-based economic policy uncertainty (EPU) index for the euro area by applying machine learning techniques to news articles from January 2000 to May 2019. The machine learning algorithm retrieves components of overall EPU, such as trade, fiscal, monetary or domestic regulations, for a wide range of languages. Recently, a steady and pronounced increase in the euro area EPU index has been observed, driven mainly by trade, domestic regulation and fiscal policy uncertainties.
- JEL Code:
- C1,C8,E65
- 6 August 2019
-
Economic Bulletin - ArticleEconomic Bulletin Issue 5, 2019Details
- Abstract:
- This article discusses the hypothesis that part of the decline in exchange rate pass-through to import prices has been the result of the rise of global value chains.
- JEL Code:
- F13,F14,F32,F41
- 5 August 2019
-
Economic Bulletin - BoxEconomic Bulletin Issue 5, 2019Details
- Abstract:
- This box assesses recent empirical analysis claiming that services trade liberalisation could be a remedy for global imbalances. The main finding of the box is that global imbalances – i.e. the magnitude of current account surpluses and deficits across countries – would remain essentially unchanged as a result of services trade liberalisation. Nonetheless (services) trade liberalisation should be expected to raise welfare overall, e.g. by fostering productivity growth.
- JEL Code:
- F13,F14,F32,F41
- 5 August 2019
-
Economic Bulletin - BoxEconomic Bulletin Issue 5, 2019Details
- Abstract:
- While both global activity and trade have been declining since mid-2018, world trade has slowed particularly sharply. This box investigates the reasons behind the decline in global trade and its decoupling from economic activity. This is largely explained by a turnaround in the most trade-intensive components of global demand, such as investment, exacerbated by rising global uncertainty and tighter financing conditions. From a production perspective, the decline in investment was reflected in a sharp slowdown in manufacturing output.
- JEL Code:
- F44,F14
- 1 August 2019
-
Working Paper Series - Issue No. 2305Details
- Abstract:
- We use an industrial organisation approach to quantify the size of Total Factor Productivity Growth (TFPG) for euro area banks after the crisis and decompose it into its main driving factors. In addition, we disentangle permanent and time-varying inefficiency in the banking sector. This is important because lack of distinction may lead to biased estimates of inefficiency and because the set of policies needed in both cases is different. We focus on 17 euro area countries over the period 2006 to 2017. We find that cost efficiency in the euro area banking sector amounted to around 84% on average over the 2006 to 2017 period. In addition, we observe that Total Factor Productivity growth for the median euro area bank decreased from around 2% in 2007 to around 1% in 2017, with technological progress being the largest contributor, followed by technical efficiency. Given the need to boost productivity and enhance profitability in the euro area banking sector, these findings suggests that bank’s efforts in areas such as rationalisation of branches, digitalisation of business processes and possibly mergers and acquisitions should be intensified.
- JEL Code:
- C23,D24,G21
- 1 August 2019
-
Working Paper Series - Issue No. 2304Details
- Abstract:
- We study optimal monetary and fiscal policy in a New Keynesian model where occasional declines in agents’ confidence can give rise to persistent liquidity trap episodes. Unlike in the case of fundamental-driven liquidity traps, there is no straightforward recipe for mitigating the welfare costs and the systematic inflation shortfall associated with expectations-driven liquidity traps. Raising the inflation target or appointing an inflation-conservative central banker improves inflation outcomes away from the lower bound but exacerbates the shortfall at the lower bound. Using government spending as an additional policy tool worsens stabilization outcomes both at and away from the lower bound. However, appointing a policymaker who is sufficiently less concerned with government spending stabilization than society can eliminate expectations-driven liquidity traps altogether.
- JEL Code:
- E52,E61,E62
- 1 August 2019
- 31 July 2019
- 31 July 2019
-
Working Paper Series - Issue No. 2303Details
- Abstract:
- Based on high frequency identification and other econometric tools, we find that monetary policy shocks had a significant impact on the health of euro area banks. Information effects, which made the private sector more pessimistic about future prospects of the economy and the profitability of the banking sector, were strongly present in the post-crisis period. We show that ECB communications at the press conference were crucial for the market response and that bank health benefitted from surprises, which steepened the yield curve. We find that the effects of monetary policy shocks on banks displayed some persistence. Other bank characteristics, in particular bank size, leverage and NPL ratios, amplified the impact of monetary policy shocks on banks. After the OMT announcement, we detect that the response of bank stocks to monetary policy shocks normalised. We discover that, in the post-crisis episode, Fed monetary policy shocks influenced euro area bank stock valuations.
- JEL Code:
- E40,E52,G14,G21
- Network:
- Research Task Force (RTF)
- 31 July 2019
-
Working Paper Series - Issue No. 2302Details
- Abstract:
- This paper proposes a large-scale Bayesian vector autoregression with factor stochastic volatility to investigate the macroeconomic consequences of international uncertainty shocks in G7 countries. The curse of dimensionality is addressed by means of a global-local shrinkage prior that mimics certain features of the well-known Minnesota prior, yet provides additional flexibility in terms of achieving shrinkage. The factor structure enables us to identify an international uncertainty shock by assuming that it is the joint volatility process that determines the dynamics of the variance-covariance matrix of the common factors. To allow for first and second moment shocks we, moreover, assume that the uncertainty factor enters the VAR equation as an additional regressor. Our findings suggest that the estimated uncertainty measure is strongly connected to global equity price volatility, closely tracking other prominent measures commonly adopted to assess uncertainty. The dynamic responses of a set of macroeconomic and financial variables show that an international uncertainty shock exerts large effects on all economies and variables under consideration.
- JEL Code:
- C30,E52,F41,E32
- 31 July 2019
-
Survey on credit terms and conditions in euro-denominated securities financing and OTC derivatives marketsAnnexes
- 31 July 2019
-
Other publication
- 31 July 2019
-
Other publication
- 31 July 2019
-
Press releaseRelated
- 31 July 2019
-
MFI interest rate statistics
- 30 July 2019
-
Weekly financial statementAnnexes
- 30 July 2019
-
Weekly financial statement - Commentary
- 30 July 2019
-
Working Paper Series - Issue No. 2301Details
- Abstract:
- This paper examines international debt issuance through Irish-resident Special Purpose Entities (SPEs). Using a unique new dataset covering the population of Irish-resident SPEs reporting to the Central Bank of Ireland over the period 2005-2017, we identify cross-country debt financing links channelled through SPEs. The empirical analysis suggests that tax optimisation is an important motive, particularly for sponsors of Irish-resident securitisation vehicles, while investor protection and financial development are important additional considerations for sponsors of non-securitisation vehicles.
- JEL Code:
- F36,G23,G15
- 30 July 2019
-
Working Paper Series - Issue No. 2300Details
- Abstract:
- Focusing on the foreign exchange reaction to macroeconomic announcements, we show that fast trading is positively and significantly correlated with the entropy of the distribution of quoted prices in reaction to news: a larger share of fast trading increases the degree of diversity of quotes in the order book, for given liquidity, order book depth and size of order flows. Exploiting the WM Reuters’ reform of the fixing methodology in February 2015 as a natural experiment, we provide evidence that fast trading raises entropy, rather than reacting to it. While more entropy in quoted prices means noisier information and arguably complicates price discovery from an individual trader’s perspective, we show that, in the aggregate, more entropy actually brings traded prices closer to the random walk hypothesis, and improves indicators of market efficiency and quality of trade execution. We estimate that a 10 percent increase in entropy reduces the negative impact of macro news by over 60% for effective spreads, against over 40% for realized spreads and price impacts. Our findings suggest that the main mechanism by which fast trading may have desirable effects on market performance specifically hinges on enhanced heterogeneity in trading patterns, best captured by entropy.
- JEL Code:
- F31,G14,G15
- 30 July 2019
-
Research Bulletin - Issue No. 61Details
- Abstract:
- Forward guidance, i.e. communication by a central bank about the likely future path of interest rates, usually reduces uncertainty. But it matters how this is done in practice, because forward guidance with a short time horizon can raise uncertainty. This occurs if the forward guidance impairs the aggregation of private information in financial markets, thus making market prices less informative.
- JEL Code:
- D83,E43,E52,E58
- 29 July 2019
-
Working Paper Series - Issue No. 2299Details
- Abstract:
- Traditionally, insurers are seen as stabilisers of financial markets that act countercyclically by buying assets whose price falls. Recent studies challenge this view by providing empirical evidence of procyclicality. This paper sheds new light on the underlying reasons for these opposing views. Our model predicts procyclicality when prices fall due to increasing risk premia, and countercyclicality in response to rises in the risk-free rate. Using granular data on insurers’ government bond holdings, we validate these predictions empirically. Our findings contribute to the current policy discussion on macroprudential measures beyond banking.
- JEL Code:
- G01,G11,G12,G22,G23
- 29 July 2019
-
Working Paper Series - Issue No. 2298Details
- Abstract:
- This paper illustrates that systemically important banks reduce a range of activities at year-end, leading to lower additional capital requirements in the form of G-SIB buffers. The effects are stronger for banks with higher incentives to reduce the indicators, and for banks with balance sheet structures that can more easily be adjusted. The observed reduction in activity may imply an overall underestimation of banks' systemic importance as well as a distortion in their relative ranking, with implications for banks' ability to absorb losses. Moreover, a reduction in the provision of certain services at year-end may adversely affect overall market functioning.
- JEL Code:
- G20,G21,G28
- 29 July 2019
- 26 July 2019
-
Governing Council decisions - Other decisions
- 26 July 2019
- 26 July 2019
-
Working Paper Series - Issue No. 2297Details
- Abstract:
- This paper reexamines from a theoretical perspective the role of monetary and macroprudential policies in addressing the build-up of risks in the financial system. We construct a stylized general equilibrium model in which the key friction comes from a moral hazard problem in firms financing that banks’ equity capital serves to ameliorate. Tight monetary policy is introduced by open market sales of government debt, and tight macroprudential policy by an increase in capital requirements. We show that both policies are useful, but macroprudential policy is more effective in fostering financial stability and leads to higher social welfare.
- JEL Code:
- G21,G28,E44,E52
- 26 July 2019
-
Working Paper Series - Issue No. 2296Details
- Abstract:
- Until now, stock market responses to a distress scenario for oil prices have been analysed considering prices in domestic currency. This assumption implies merging the commodity risk with the exchange rate risk when oil and stocks are traded in different currencies. This article proposes incorporating explicitly the exchange rate, using the convolution concept, to assess how could change the stock market response depending on the source of risk that moves oil prices. I apply this framework to study the change in the 10th lowest percentile of the European stock market under an oil-related stress scenario, without overlooking the role of the exchange rate. The empirical exercise shows that the same stress oil-related scenario in euros could generate an opposite impact in the European stock market depending on the source of risk. The source of risk is not incorporated when performing a bivariate analysis, which suggests ambiguous estimates of the stock response. This framework can improve our understanding of how the exchange rate interacts in global markets. Also, it contributes to reduce the inaccuracy in the impact assessment of foreign shocks where the exchange rate plays a relevant role.
- JEL Code:
- E30,E37,E44,G10
- 26 July 2019
-
Euro area economic and financial developments by institutional sector (full)
- 26 July 2019
- 26 July 2019
- 26 July 2019
-
Press releaseRelated
- 26 July 2019
-
Survey of Professional Forecasters
- 26 July 2019
-
Payment instruments and systems
- 26 July 2019
-
Survey of Professional ForecastersAnnexes
- 26 July 2019
-
Survey of Professional Forecasters
Related- 26 July 2019
- 26 July 2019
- 25 July 2019
-
Monetary policy statementDetails
- Subtitle:
- Mario Draghi, President of the ECB,Luis de Guindos, Vice-President of the ECB,Frankfurt am Main, 25 July 2019
- 25 July 2019
-
Monetary policy decision
- 25 July 2019
- 24 July 2019
-
Monetary developments in the euro area
- 23 July 2019
-
Weekly financial statementAnnexes
- 23 July 2019
-
Weekly financial statement - Commentary
- 23 July 2019
-
Euro area bank lending survey - Issue No. 2019Annexes
- 23 July 2019
-
Euro area bank lending survey - Annex
Related- 23 July 2019
-
Press release
- 23 July 2019
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Press releaseRelated
- 23 July 2019
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Euro area bank lending survey - Issue No. 2019
- 19 July 2019
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Balance of payments (monthly)
- 17 July 2019
-
Working Paper Series - Issue No. 2295Details
- Abstract:
- We perform a robust estimation of the Phillips curve in the euro area using a battery of 630 theory-driven models. We extend the existing literature by adding model specifications, taking into account the uncertainty in the measurement of variables and testing for potential non-linearities and structural changes. Using Dynamic Model Averaging, we identify the most important determinants of inflation over the sample. We then forecast core inflation 12 quarters ahead and present its probability distribution. We compare the distribution of forecasts performed in recent years, and we assess, in a probabilistic manner, the convergence towards a sustainable path of inflation.
- JEL Code:
- C30,E52,F41,E32
- 17 July 2019
-
Occasional Paper Series - Issue No. 227Details
- Abstract:
- This occasional paper describes how the financial stability and macroprudential policy functions are organised at the ECB. Financial stability has been a key policy function of the ECB since its inception. Macroprudential policy tasks were later conferred on the ECB by the Single Supervisory Mechanism (SSM) Regulation. The paper describes the ECB’s macroprudential governance framework in the new institutional set-up. After reviewing the concept and origins of systemic risk, it reflects on the emergence of macroprudential policy in the aftermath of the financial crisis, its objectives and instruments, as well as specific aspects of this policy area in a monetary union such as the euro area. The ECB’s responsibilities required new tools to be developed to measure systemic risk at financial institution, country and system-wide level. The paper discusses selected analytical tools supporting financial stability surveillance and assessment work, as well as macroprudential policy analysis at the ECB. The tools are grouped into three broad areas: (i) methods to gauge the state of financial instability or prospects of near-term systemic stress, (ii) measures to capture the build-up of systemic risk focused on country-level financial cycle measurement and early warning methods, and (iii) the ECB stress testing framework for macroprudential purposes.
- JEL Code:
- E37,F36,G20,G28,K23
- 17 July 2019
-
SpeechDetails
- Subtitle:
- Introductory remarks by Benoît Cœuré, Member of the Executive Board of the ECB, prior to an informal exchange of views with the High Council of Public Finance, Paris, 17 July 2019
- 16 July 2019
-
Weekly financial statementAnnexes
- 16 July 2019
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Weekly financial statement - Commentary
- 16 July 2019
- 16 July 2019
-
Research Bulletin - Issue No. 60Details
- Abstract:
- The effects of interest rate surprises on banks are different when nominal interest rates are very low. In “normal” times, policy rate announcements that are below market expectations tend to boost banks’ stock prices on average. When interest rates are very low, however, there is a reversal of this effect: at such times, negative rate surprises reduce banks’ stock prices. This negative impact is larger for banks whose funding relies more on retail deposits than on other sources of funding.
- JEL Code:
- E52,E58,G21
- Network:
- Research Task Force (RTF)
- 11 July 2019
-
Press release
- 11 July 2019
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Monetary policy account
- 11 July 2019
-
SpeechDetails
- Subtitle:
- Speech by Benoît Cœuré, Member of the Executive Board of the ECB, at an event organised by the SAFE Policy Center, Frankfurt am Main, 11 July 2019
Annexes- 11 July 2019
-
Speech
- 11 July 2019
- 10 July 2019
- 10 July 2019
-
Working Paper Series - Issue No. 2294Details
- Abstract:
- We assess the effects of regulatory caps in the loan-to-value (LTV) ratio using agent-based models (ABMs). Our approach builds upon a straightforward ABM where we model the interactions of sellers, buyers and banks within a computational framework that enables the application of LTV caps. The results are first presented using simulated data and then we calibrate the probability distributions based on actual European data from the HFCS survey. The results suggest that this approach can be viewed as a useful alternative to the existing analytical frameworks for assessing the impact of macroprudential measures, mainly due to the very few assumptions the method relies upon and the ability to easily incorporate additional and more complex features related to the behavioral response of borrowers to such measures.
- JEL Code:
- D14,D31,E50,R21
- 10 July 2019
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Euro area securities issues statistics
- 9 July 2019
-
InterviewDetails
- Subtitle:
- Interview on Twitter with Philip R. Lane, Member of the Executive Board of the ECB, conducted and published on 9 July 2019
- 9 July 2019
-
Weekly financial statementAnnexes
- 9 July 2019
-
Weekly financial statement - Commentary
- 8 July 2019
-
InterviewDetails
- Subtitle:
- Interview with Benoît Cœuré, Member of the Executive Board of the ECB, conducted by Hedwige Chevrillon, published on 9 July 2019
- 8 July 2019
-
Working Paper Series - Issue No. 2293Details
- Abstract:
- We trace the impact of the ECB’s asset purchase programme (APP) on the sovereign yield curve. Exploiting granular information on sectoral asset holdings and ECB asset purchases, we construct a novel measure of the “free-float of duration risk” borne by price-sensitive investors. We include this supply variable in an arbitrage-free term structure model in which central bank purchases reduce the free-float of duration risk and hence compress term premia of yields. We estimate the stock of current and expected future APP holdings to reduce the 10y term premium by 95 bps. This reduction is persistent, with a half-life of five years. The expected length of the reinvestment period after APP net purchases is found to have a significant impact on term premia.
- JEL Code:
- C5,E43,E52,E58,G12
- 8 July 2019
-
Survey of Monetary Analysts
- 5 July 2019
-
MFI interest rate statistics
- 4 July 2019
-
SpeechDetails
- Subtitle:
- Keynote speech by Luis de Guindos, Vice-President of the ECB, at the CIRSF Annual International Conference 2019 “Financial Supervision and Financial Stability Ten Years after the Crisis: Achievements and Next Steps”, Lisbon, 4 July 2019
- 4 July 2019
-
SpeechDetails
- Subtitle:
- Welcome remarks by Philip R. Lane, Member of the Executive Board of the ECB, at the ECB conference on “Challenges in the digital age”, Frankfurt, 4 July 2019
- 3 July 2019
-
Weekly financial statementAnnexes
- 3 July 2019
-
Weekly financial statement - Commentary
- 3 July 2019
-
Euro area economic and financial developments by institutional sector (early)
- 3 July 2019
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Balance of payments (quarterly)
- 2 July 2019
-
InterviewDetails
- Subtitle:
- Interview with Philip R. Lane, Member of the Executive Board of the ECB, conducted by Aapo Parviainen and broadcast on 1 July 2019
- 2 July 2019
-
Occasional Paper Series - Issue No. 226Details
- Abstract:
- This paper presents an approach to a macroprudential stress test for the euro area banking system, comprising the 91 largest euro area credit institutions across 19 countries. The approach involves modelling banks’ reactions to changing economic conditions. It also examines the effects of adverse scenarios on economies and the financial system as a whole by acknowledging a broad set of interactions and interdependencies between banks, other market participants, and the real economy. Our results highlight the importance of the starting level of bank capital, bank asset quality, and banks’ adjustments for the propagation of shocks to the financial sector and real economy.
- JEL Code:
- E37,E58,G21,G28
- 2 July 2019
-
Euro money market statistics
- 1 July 2019
-
SpeechDetails
- Subtitle:
- Speech by Philip R. Lane, Member of the Executive Board of the ECB, at the Bank of Finland conference on Monetary Policy and Future of EMU
- 1 July 2019
-
Monetary developments in the euro area
- 1 July 2019
- 29 June 2019
-
SpeechDetails
- Subtitle:
- Speech by Yves Mersch, Member of the Executive Board of the ECB, at the Petersberger Sommerdialog, Königswinter, 29 June 2019
- 28 June 2019
-
Governing Council decisions - Other decisions
- 28 June 2019
-
Working Paper Series - Issue No. 2292Details
- Abstract:
- We study the impact of higher bank capital buffers, namely of the Other Systemically Important Institutions (O-SII) buffer, on banks' lending and risk-taking behaviour. The O-SII buffer is a macroprudential policy aiming to increase banks' resilience. However, higher capital requirements associated with the policy may likely constrain lending. While this may be a desired effect of the policy, it could, at least in the short-term, pose costs for economic activity. Moreover, by changing the relative attractiveness of different asset classes, a higher capital requirement could also lead to risk-shifting and therefore promote the build-up (or deleverage) of banks' risk-taking. Since the end of 2015, national authorities, under the EBA framework, started to identify banks as O-SII and impose additional capital buffers. The identification of the O-SII is mainly based on a cutoff rule, ie. banks whose score is above a certain threshold are automatically designated as systemically important. This feature allows studying the effects of higher capital requirements by comparing banks whose score was close to the threshold. Relying on confidential granular supervisory data, between 2014 and 2017, we find that banks identified as O-SII reduced, in the short-term, their credit supply to households and financial sectors and shifted their lending to less risky counterparts within the non-financial corporations. In the medium-term, the impact on credit supply is defused and banks shift their lending to less risky counterparts within the financial and household sectors. Our findings suggest that the discontinuous policy change had limited effects on the overall supply of credit although we find evidence of a reduction in the credit supply at the inception of the macroprudential policy. This result supports the hypothesis that the implementation of the O-SII's framework could have a positive disciplining effect by reducing banks' risk-taking while having only a reduced adverse impact
- JEL Code:
- E44,E51,E58,G21,G28
- Network:
- Research Task Force (RTF)
- 28 June 2019
- 28 June 2019
-
Euro area monetary and financial statistics - Quality report
- 28 June 2019
- 28 June 2019
-
SpeechDetails
- Subtitle:
- Introductory remarks by Sabine Lautenschläger, Member of the Executive Board of the ECB, at the third meeting of the Euro Cyber Resilience Board for pan-European Financial Infrastructures, Frankfurt am Main, 28 June 2019
- 27 June 2019
-
Research Bulletin - Issue No. 59Details
- Abstract:
- Recent low inflation is motivating new research to better characterise how individual firms and workers set prices and wages. In this article, we describe a new approach which emphasises that the costs of decision-making may limit the precision of price and wage changes. As well as making better sense of price and wage changes in microeconomic data, this new approach also strikes a middle ground between two leading models of monetary policy transmission, improving our quantitative understanding of the short-run effects of monetary policy on output and the short-run trade-off between inflation and unemployment.
- JEL Code:
- E31,D81,C73
- 26 June 2019
- 26 June 2019
-
Legal Working Paper Series - Issue No. 18Details
- Abstract:
- Procurement law is rising in importance year after year. According to the European Commission, public procurement now accounts for over 14% of the EU’s gross domestic product. Also at the ECB, spending through procurement is growing, and the evolution of its procurement law from non-binding internal guidelines to a transparent and comprehensive legal framework is a clear reflection of this development.The purpose of this working paper is to summarise the legal framework for public procurement at the ECB, to compare it to the procurement rules of other EU institutions, and to analyse four key issues in contract award procedures, with due regard to the EU procurement directives and the case law of the Court of Justice of the EU.Due to its specific legal status and organisational autonomy, the ECB can define and adopt its own procurement rules. It is not subject to the EU procurement directives. They are addressed to Member States and not to EU institutions. The ECB is also not bound by the EU Financial Regulation, which applies to most other EU institutions financed from the EU budget.The working paper starts with a look back on the evolution of the ECB’s procurement rules since the establishment of the bank in 1998. We then analyse the current framework, laid down in Decision ECB/2016/2, in more detail.The second chapter summarises public procurement rules of other EU institutions, namely, the Financial Regulation and the procurement guide of the European Investment Bank which, like the ECB, is not subject to the Financial Regulation.The third chapter analyses how the differences in these legal frameworks affect procurement procedures in practice, with a focus on four key aspects of the award process: selection and award criteria, transparency and publication, proportionality and legal remedies
- JEL Code:
- K23,K40
- 25 June 2019
-
SpeechDetails
- Subtitle:
- Dinner remarks by Benoît Cœuré, Member of the Executive Board of the ECB, at the International Swaps and Derivatives Association, Frankfurt am Main, 25 June 2019
- 25 June 2019
-
Weekly financial statementAnnexes
- 25 June 2019
-
Weekly financial statement - Commentary
- 25 June 2019
-
SpeechDetails
- Subtitle:
- Keynote speech by Luis de Guindos, Vice-President of the ECB, at the ABI annual conference “Banking Union and Basel III – risk and supervision 2019”, Rome, 25 June 2019
- 24 June 2019
-
SpeechDetails
- Subtitle:
- Presentation by Sabine Lautenschläger, Member of the Executive Board of the ECB, at Rotary Club Frankfurt am Main, Frankfurt am Main, 24 June 2019
- 20 June 2019
-
Economic Bulletin - BoxEconomic Bulletin Issue 4, 2019Details
- Abstract:
- This box describes the ECB’s monetary policy operations during the first and second reserve maintenance periods of 2019, which ran from 30 January to 12 March 2019 and from 13 March to 16 April 2019 respectively.
- JEL Code:
- E40,E52,E58
- 20 June 2019
-
Economic Bulletin - BoxEconomic Bulletin Issue 4, 2019Details
- Abstract:
- Economic agents’ confidence and developments in the real economy are intrinsically linked. Confidence largely reflects broad economic conditions but, at times, may also become an autonomous source of business cycle fluctuations. This box looks at the potential propagation effects of lower confidence on investment in recent times. Isolating the structural confidence shocks from the euro area Economic Sentiment Indicator and applying them in the ECB’s main macroeconomic projection model suggests that confidence shocks had a positive impact on business investment growth in the last two years and a negative one in 2019.
- JEL Code:
- E22,E37,D84
- 20 June 2019
-
Economic Bulletin - BoxEconomic Bulletin Issue 4, 2019Details
- Abstract:
- This box analyses recent developments in the financial account of the euro area balance of payments. In 2018, the euro area recorded net financial outflows of 2.7% of GDP amid an overall decline in gross cross-border financial flows. Portfolio investment, particularly in debt securities, continued to be affected by the Eurosystem’s asset purchase programme. At the same time, the euro area recorded a retrenchment in foreign direct investment flows, mainly reflecting transactions vis-à-vis the United States, most likely linked to the US tax reform.
- JEL Code:
- F21,F32
- 20 June 2019
-
Economic Bulletin
- 19 June 2019
-
Occasional Paper Series - Issue No. 225Details
- Abstract:
- Firms are heterogeneous, even within narrowly defined sectors. This paper surveys the relevant theoretical and empirical literature on firm heterogeneity and external trade. By innovatively exploiting rich cross-country micro-aggregated data sourced from the ECB Competitiveness Research Network (CompNet), this study then investigates the main implications of firm heterogeneity for trade of EU countries, showing a set of stylised facts. On the one hand, exporting firms are larger, more productive and pay higher wages than non-exporting firms. Only these firms are able to bear export costs, related to various factors, such as tariff and non-tariff trade barriers, the quality of the legal system or access to finance. Hence, only few enterprises actually export, and the intensity of aggregate export concentration within few large firms varies across countries and sectors. On the other hand, opening to trade boosts individual firms’ productivity growth, via a number of channels, and also enhances allocative efficiency across firms, in turn increasing aggregate productivity growth. One of the main standard determinants of export growth, namely changes in the real effective exchange rate, impacts aggregate performance differently across countries and sectors, depending on sectoral composition and on firm characteristics within a given sector
- JEL Code:
- F14,L25
- 19 June 2019
-
Balance of payments (monthly)
- 19 June 2019
-
Economic Bulletin - BoxEconomic Bulletin Issue 4, 2019Details
- Abstract:
- Rent inflation in the euro area has been subdued since the beginning of 2018, notwithstanding dynamics house price developments, and appears as a factor mitigating services and underlying inflation. Several factors affecting rent formation, such as low financing costs and a low-yield environment, may have contributed to these developments. In addition, rent indexation prevents rent from rising freely and a large fraction of existing rental contracts are not subject to rent increases. Relatively subdued rent inflation in the euro area is mainly due to low inflation and a limited turnover in rental contracts.
- JEL Code:
- E31,E66
- 19 June 2019
-
Economic Bulletin - ArticleEconomic Bulletin Issue 4, 2019Details
- Abstract:
- In this article we look at the euro area labour market using the framework underlying the Beveridge curve, which captures the negative relationship between the unemployment rate and the job vacancy rate. The Beveridge curve shows that, at a given moment in time, there are jobs vacant and people unemployed, while the shape and the position of the curve provide important information about the functioning of the labour market. There are two key concepts associated with the Beveridge curve: labour market tightness and matching efficiency. Labour market tightness is the number of vacant posts per each unemployed person and matching efficiency reflects the market’s ability to match individuals to jobs. We analyse the importance of these two concepts for wage developments using a simple version of the search and matching model, where unemployment, wages and vacancies are jointly determined and the Beveridge curve features prominently. First, we derive two aggregate measures that encapsulate the changes in the vacancy -unemployment space: labour market tightness and matching efficiency. Second, we look at the information content behind market tightness and job matching efficiency to analyse the euro area labour market and its cyclical conditions. Third, aggregate measures of labour market tightness and efficiency are used in a standard wage Phillips curve equation to measure their marginal impact. The results support the view that labour market tightness and labour market efficiency both play a role in explaining wage developments. However, the quantitative implications for wages differ only marginally from those of the standard Phillips curve approach. Overall, labour market efficiency provides an important qualitative margin of labour market functioning that is not captured in standard wage Phillips curve specifications.
- JEL Code:
- E24,J63,J64
- 18 June 2019
-
Weekly financial statementAnnexes
- 18 June 2019
-
Weekly financial statement - Commentary
- 18 June 2019
-
SpeechDetails
- Subtitle:
- Speech by Mario Draghi, President of the ECB, ECB Forum on Central Banking, Sintra, 18 June 2019
- 17 June 2019
-
Economic Bulletin - BoxEconomic Bulletin Issue 4, 2019Details
- Abstract:
- This box looks at periods of slowdowns during a number of euro area expansionary phases – so-called soft patches – and assesses whether these contain any information with regard to forthcoming business cycle peaks and possible subsequent recessions.
- JEL Code:
- E32,E66
- 17 June 2019
-
Economic Bulletin - ArticleEconomic Bulletin Issue 4, 2019Details
- Abstract:
- In this article we review the evolution of euro area HICP inflation excluding energy and food since the Great Financial Crisis through the lens of the Phillips curve. This period is particularly interesting, as the euro area experienced two recessions (in 2008-2009 and 2011-2014) and a protracted episode of low inflation from 2013 onwards. We estimate a large set of Phillips curve models for the euro area and review the interpretation of inflation developments that they provide over time. We highlight both the advantages and some of the limitations of this type of analysis. We find that our models can account for much of the weakness in underlying inflation between 2013 and mid-2017, but that they cannot account for the most recent weakness in underlying inflation.
- JEL Code:
- E31,E58
- 17 June 2019
-
InterviewDetails
- Subtitle:
- Interview with Benoît Cœuré, Member of the Executive Board of the ECB, conducted by Claire Jones on 12 June, and published on 17 June 2019
- 15 June 2019
-
InterviewDetails
- Subtitle:
- Interview with Luis de Guindos, Vice-President of the ECB, conducted by Federico Fubini on 13 June 2019
- 14 June 2019
-
SpeechDetails
- Subtitle:
- Speech by Sabine Lautenschläger, Member of the Executive Board of the ECB, at the European Association of Co-operative Banks, Berlin, 14 June 2019
- 14 June 2019
- 14 June 2019
- 14 June 2019
- 14 June 2019
- 13 June 2019
-
The international role of the euro - Issue No. 2019Annexes
- 11 June 2019
-
The international role of the euro
Related- 13 June 2019
-
Press release
- 13 June 2019
-
Occasional Paper Series - Issue No. 224Details
- Abstract:
- Well-functioning economic structures are key for resilient and prospering euro area economies. The global financial and sovereign debt crises exposed the limited resilience of the euro area’s economic structures. Economic growth was masking underlying weaknesses in several euro area countries. With the inception of the crises, significant efforts have been undertaken by Member States individually and collectively to strengthen resilience of economic structures and the smooth functioning of the euro area. National fiscal policies were consolidated to keep the increase in government debt contained and structural reform momentum increased notably in the second decade, particularly in those countries most hit by the crisis. The strengthened national economic structures were supported by a reformed EU crisis and economic governance framework. However, overall economic structures in euro area countries are still not fully commensurate with the requirements of a monetary union. Moreover, remaining challenges, such as population ageing, low productivity and the implications of digitalisation, will need to be addressed to increase economic resilience and long-term growth.
- JEL Code:
- E31,E32,E60,E62,F10,J11,O43
- 13 June 2019
-
The international role of the euro - Special featureThe international role of the euro 2019Details
- 13 June 2019
-
The international role of the euro - Special featureThe international role of the euro 2019Details
- 13 June 2019
-
The international role of the euro - Special featureThe international role of the euro 2019Details
- 13 June 2019
-
The international role of the euro - Special featureThe international role of the euro 2019Details
- 13 June 2019
-
The international role of the euro - BoxThe international role of the euro 2019Details
- 13 June 2019
-
The international role of the euro - BoxThe international role of the euro 2019Details
- 13 June 2019
-
The international role of the euro - BoxThe international role of the euro 2019Details
- 13 June 2019
-
The international role of the euro - BoxThe international role of the euro 2019Details
- 13 June 2019
-
The international role of the euro - BoxThe international role of the euro 2019Details
- 13 June 2019
-
The international role of the euro - BoxThe international role of the euro 2019Details
- 13 June 2019
-
The international role of the euro - BoxThe international role of the euro 2019Details
- 13 June 2019
-
The international role of the euro - BoxThe international role of the euro 2019Details
- 13 June 2019
-
Press releaseRelated
- 13 June 2019
-
The international role of the euro - Issue No. 2019
- 13 June 2019
- 13 June 2019
-
Euro area securities issues statistics
- 12 June 2019
-
SpeechDetails
- Subtitle:
- Closing remarks by Benoît Cœuré, Member of the Executive Board of the ECB, at the ECB’s Bond Market Contact Group meeting, 12 June 2019
Annexes- 12 June 2019
- 12 June 2019
-
SpeechDetails
- Subtitle:
- Speech by Mario Draghi, President of the ECB, at the 8th ECB conference on central, eastern and south-eastern European countries, Frankfurt, 12 June 2019
- 12 June 2019
-
T2S financial statement
- 11 June 2019
- 11 June 2019
-
Weekly financial statementAnnexes
- 11 June 2019
-
Weekly financial statement - Commentary
- 11 June 2019
-
Working Paper Series - Issue No. 2291Details
- Abstract:
- The Eurosystem/ECB staff macroeconomic projection exercises constitute an important input to the ECB's monetary policy. This work marks a thorough analysis of the Eurosystem/ECB projection errors by looking at criteria of optimality and rationality using techniques widely employed in the applied literature of forecast evaluation. In general, the results are encouraging and suggest that Eurosystem/ECB staff projections abide to the main characteristics that constitute them reliable as a policy input. Projections of GDP - up to one year - and inflation are optimal - in the case of inflation they are also rational. A main finding is that GDP forecasts can be substantially improved, especially at long horizons.
- JEL Code:
- C53,E37,E58
- 11 June 2019
-
Working Paper Series - Issue No. 2290Details
- Abstract:
- We study empirically how competition among high-frequency traders (HFTs) affects their trading behavior and market quality. Our analysis exploits a unique dataset, which allows us to compare environments with and without high-frequency competition, and contains an exogenous event - a tick size reform - which we use to disentangle the effects of the rising share of high-frequency trading in the market from the effects of high-frequency competition. We find that when HFTs compete, their speculative trading increases. As a result, market liquidity deteriorates and short-term volatility rises. Our findings hold for a variety of market quality and high-frequency trading behavior measures.
- JEL Code:
- G12,G14,G15,G18,G23,D4,D61
- 10 June 2019
-
SpeechDetails
- Subtitle:
- Remarks by Luis de Guindos, Vice-President of the ECB, during the Instituto de Empresa (IE) Business Leadership Forum at the IE Business School, Madrid, 10 June 2019
- 7 June 2019
-
Working Paper Series - Issue No. 2289Details
- Abstract:
- Exploiting confidential data from the euro area, we show that sound banks pass on negative rates to their corporate depositors without experiencing a contraction in funding and that the degree of pass-through becomes stronger as policy rates move deeper into negative territory. The negative interest rate policy provides stimulus to the economy through firms’ asset rebalancing. Firms with high cash-holdings linked to banks charging negative rates increase their investment and decrease their cash-holdings to avoid the costs associated with negative rates. Overall, our results challenge the common view that conventional monetary policy becomes ineffective at the zero lower bound.
- JEL Code:
- E52,E43,G21,D22,D25
- Network:
- Research Task Force (RTF)
- 7 June 2019
-
Working Paper Series - Issue No. 2288Details
- Abstract:
- Loan loss provisions in the euro area are negatively related to GDP growth, i.e., they are procyclical. Loan loss provisions tend to be more procyclical at larger and better capitalized banks. The procyclicality of loan loss provisions can explain about two-thirds of the variation of bank capitalization over the business cycle. We estimate that provisioning procyclicality in the euro area is about twice as large as in other advanced economies. This difference reflects a larger procyclicality of provisioning in euro area countries already prior to euro adoption, and the divergent growth experiences of euro area countries following the global financial crisis.
- JEL Code:
- G20
- 7 June 2019
-
Euro area balance of payments and international investment position statistics - Quality report - Issue No. 2019Annexes
- 3 June 2019
-
- Issue No. 2019
- 7 June 2019
-
Euro area quarterly financial accounts - Quality report - Issue No. 2019Annexes
- 3 June 2019
-
- Issue No. 2019
- 6 June 2019
- 6 June 2019
-
Macroeconomic projections for the euro areaAnnexes
- 6 June 2019
- 21 June 2019
-
Macroeconomic projections for the euro area
- 6 June 2019
-
Monetary policy statementDetails
- Subtitle:
- Mario Draghi, President of the ECB,Luis de Guindos, Vice-President of the ECB,Vilnius, 6 June 2019
- 6 June 2019
-
Monetary policy decision
- 4 June 2019
-
Weekly financial statementAnnexes
- 4 June 2019
-
Weekly financial statement - Commentary
- 4 June 2019
-
Press releaseAnnexes
- 4 June 2019
-
MFI interest rate statistics
- 3 June 2019
-
Euro area insurance corporations statistics
- 31 May 2019
-
InterviewDetails
- Subtitle:
- Interview Peter Praet, Lid van de directie van de ECB, afgenomen door Peter de Groote en Wouter Vervenne op 22 mei en gepubliceerd op 1 juni 2019
- 31 May 2019
-
InterviewDetails
- Subtitle:
- Entretien avec Peter Praet, membre du directoire de la BCE, accordé à Marc Lambrechts le 22 mai et publié le 1 juin 2019
- 31 May 2019
-
Press release
- 31 May 2019
-
T2S Annual Report
- 31 May 2019
-
Other publication
- 31 May 2019
- 31 May 2019
-
Other publication
- 29 May 2019
-
Press release
- 29 May 2019
-
Press releaseRelated
- 29 May 2019
-
Survey on the Access to Finance of Enterprises in the euro area
- 29 May 2019
-
Financial Stability Review - ArticleFinancial Stability Review Issue 1, 2019Details
- Abstract:
- The countercyclical capital buffer (CCyB) is one of the centrepieces of the post-crisis reforms that introduced macroprudential policy instruments and aims to protect the resilience of the financial system. As only a few euro area countries have activated the CCyB, macroprudential authorities currently have limited policy space to release buffer requirements in adverse circumstances. This special feature provides insights into the relevant macroprudential policy response under different macroeconomic conditions and a gradual build-up of cyclically adjustable buffers could be considered to help create the necessary macroprudential space and to reduce the procyclicality of the financial system in an economic and financial downturn.
- JEL Code:
- E58,G18,G28
- 29 May 2019
-
Financial Stability Review - ArticleFinancial Stability Review Issue 1, 2019Details
- Abstract:
- The financial system can become more vulnerable to systemic banking crises as the potential for contagion across financial institutions increases. This contagion risk could arise because of shifts in the interlinkages between financial institutions, including the volume and complexity of contracts between them, and because of shifts in the economic risks to which they are commonly exposed. Analysis of the euro area banking system’s interlinkages, using the newly available large exposure data, suggests that the system could be more vulnerable to financial contagion through long-term interbank exposures than noted in other studies. That said, common exposures to the real economy – a standard contagion channel in the literature – represent a potential source of individual bank distress and non-systemic events. This analysis also provides an insight into the changes in contagion risk in the system over time, helping us to interpret changes in market indicators of systemic risk, such as aggregated credit default swap (CDS) prices.
- 29 May 2019
-
Financial Stability Review - ArticleFinancial Stability Review Issue 1, 2019Details
- Abstract:
- This special feature discusses the channels through which climate change can affect financial stability and illustrates the exposure of euro area financial institutions to risks from climate change with the help of granular data. Notwithstanding currently limited data availability, the analysis shows that climate change-related risks have the potential to become systemic for the euro area, in particular if markets are not pricing the risks correctly. A deeper understanding of the relevance of climate change-related risks for the euro area financial system at large is therefore needed. Better data availability and comparability and the development of a forward-looking framework for risk assessments are important aspects of this work going forward.
- JEL Code:
- G01,G18,G20,Q54
- 29 May 2019
-
Press releaseRelated
- 29 May 2019
-
Financial Stability Review
- 29 May 2019
-
Financial Stability ReviewRelated
- 29 May 2019
- 29 May 2019
-
Survey on the Access to Finance of Enterprises in the euro areaAnnexes
- 29 May 2019
-
SAFE questionnaire
Related - 29 May 2019
-
SpeechDetails
- Subtitle:
- Speech by Yves Mersch, Member of the Executive Board of the ECB, at Zahlungsverkehrssymposium, Deutsche Bundesbank, Frankfurt, 29 May 2019
- 28 May 2019
-
Weekly financial statementAnnexes
- 28 May 2019
-
Weekly financial statement - Commentary
- 28 May 2019
-
Monetary developments in the euro area
- 28 May 2019
-
Press release
- 27 May 2019
-
Working Paper Series - Issue No. 2287Details
- Abstract:
- The architecture of supervision – how we define the allocation of supervisory powers to different policy institutions – can have implications for policy conduct and for the economic and financial environment in which these policies are implemented. Theoretically, an integrated structure for monetary policy and supervision brings important benefits arising from better information flow and policy coordination. Aggregate supervisory information may significantly improve the conduct of monetary policy and the effectiveness of the lender of last resort function. As long as the process towards an integrated structure does not shrink the set of available tools, monetary policy and supervision are no less effective in pursuing their objectives than a separated structure. Additionally, an integrated structure does not seem to be correlated with more price and/or financial instability, as suggested by analysing a large global set of countries with different supervisory set-ups. A centralised structure for supervision entails significant benefits in terms of fewer opportunities for supervisory arbitrage by banks and less informational asymmetry. A large central supervisor can take advantage of economies of scale and scope in supervision and gain a broader perspective on the stability of the entire banking sector, which should result in improved financial stability. Potential drawbacks of a centralised supervisory structure are the possible lack of specialisation relative to local supervisors and the increased distance between the supervisor and the supervised institutions. We discuss the implications of our findings in the euro area context and in relation to the design of the Single Supervisory Mechanism (SSM).
- JEL Code:
- E5,G21,G38
- Network:
- Discussion papers
- 27 May 2019
-
Discussion Paper Series - Issue No. 9Details
- Abstract:
- The architecture of supervision – how we define the allocation of supervisory powers to different policy institutions – can have implications for policy conduct and for the economic and financial environment in which these policies are implemented. Theoretically, an integrated structure for monetary policy and supervision brings important benefits arising from better information flow and policy coordination. Aggregate supervisory information may significantly improve the conduct of monetary policy and the effectiveness of the lender of last resort function. As long as the process towards an integrated structure does not shrink the set of available tools, monetary policy and supervision are no less effective in pursuing their objectives than a separated structure. Additionally, an integrated structure does not seem to be correlated with more price and/or financial instability, as suggested by analysing a large global set of countries with different supervisory set-ups. A centralised structure for supervision entails significant benefits in terms of fewer opportunities for supervisory arbitrage by banks and less informational asymmetry. A large central supervisor can take advantage of economies of scale and scope in supervision and gain a broader perspective on the stability of the entire banking sector, which should result in improved financial stability. Potential drawbacks of a centralised supervisory structure are the possible lack of specialisation relative to local supervisors and the increased distance between the supervisor and the supervised institutions. We discuss the implications of our findings in the euro area context and in relation to the design of the Single Supervisory Mechanism (SSM).
- JEL Code:
- E5,G21,G38
- 27 May 2019
-
TARGET Annual Report
- 27 May 2019
-
SpeechDetails
- Subtitle:
- Introductory remarks by Benoît Cœuré, Member of the Executive Board of the ECB and Chair of the CPMI, at the ‘High-level meeting on financial inclusion’, Basel, 27 May 2019
- 24 May 2019
-
Governing Council decisions - Other decisions
- 24 May 2019
-
Working Paper Series - Issue No. 2286Details
- Abstract:
- How far should capital requirements be raised in order to ensure a strong and resilient banking system without imposing undue costs on the real economy? Capital requirement increases make banks safer and are beneficial in the long run but also entail transition costs because their imposition reduces credit supply and aggregate demand on impact. In the baseline scenario of a quantitative macro-banking model, 25% of the long-run welfare gains are lost due to transitional costs. The strength of monetary policy accommodation and the degree of bank riskiness are key determinants of the trade-off between the short-run costs and long-run benefits from changes in capital requirements.
- JEL Code:
- E3,E44,G01,G21
- Network:
- Research Task Force (RTF)
- 23 May 2019
-
Monetary policy account
- 23 May 2019
-
Working Paper Series - Issue No. 2285Details
- Abstract:
- We analyse the cross-border propagation of prudential regulation in the euro area. Using the Prudential Instruments Database (Cerutti et al., 2017b) and a unique confidential database on balance sheets items of euro-area financial institutions we estimate panel models for 248 banks from 16 euro-area countries. We find that domestic banks reduce lending after the tightening of capital requirements in other countries, while they increase lending when loan-to-value (LTV) limits or reserve requirements are tightened abroad. We also find that foreign affiliates increase lending following the tightening of sector-specific capital buffers in the countries where their parent banks reside and that bank size and liquidity play a role in determining the magnitude of cross-border spillovers.
- JEL Code:
- G21,F34,F36
- Network:
- Research Task Force (RTF)
- 23 May 2019
-
SpeechDetails
- Subtitle:
- Speech by Luis de Guindos, Vice-President of the ECB, Association for Financial Markets in Europe Conference, Supervision and Integration Opportunities for European Banking and Capital Markets, Frankfurt am Main, 23 May 2019
- 23 May 2019
-
Research Bulletin - Issue No. 58Details
- Abstract:
- What role does prudential regulation play in the prevention of banking crises? Before the financial crisis there were important national differences in the implementation of the EU framework for capital regulation. This article suggests that these differences had important implications for the resilience of banks during the crisis and that, generally, banks that were subject to less stringent prudential regulation before the crisis were more likely to require some form of public support when the crisis came.
- JEL Code:
- G01,G21,G28
- Network:
- Research Task Force (RTF)
- 22 May 2019
-
Working Paper Series - Issue No. 2284Details
- Abstract:
- Prior to the financial crisis, prudential regulation in the EU was implemented non-uniformly across countries, as options and discretions allowed national authorities to apply a more favorable regulatory treatment. We exploit the national implementation of the CRD and derive a country measure of regulatory flexibility (for all banks in a country) and of supervisory discretion (on a case-by-case basis). Overall, we find that banks established in countries with a less stringent prudential framework were more likely to require public support during the crisis. We instrument some characteristics of bank balance sheets with these prudential indicators to investigate how they affect bank resilience. The share of non-interest income explained by the prudential environment is always associated with an increase in the likelihood of financial distress during the crisis. Prudential frameworks also explain banks’ liquidity buffers even in absence of a specific liquidity regulation, which points to possible spillovers across regulatory instruments.
- JEL Code:
- G01,G21,G28
- Network:
- Research Task Force (RTF)
- 22 May 2019
-
Euro area investment fund statistics
- 22 May 2019
-
Euro area financial vehicle corporation statistics
- 21 May 2019
-
Weekly financial statementAnnexes
- 21 May 2019
-
Weekly financial statement - Commentary
- 21 May 2019
-
SpeechDetails
- Subtitle:
- Speech by Luis de Guindos, Vice-President of the ECB, London City Week, London, 21 May 2019
- 20 May 2019
-
Working Paper Series - Issue No. 2283Details
- Abstract:
- Negative interest rate policy (NIRP) is associated with a particular friction. The remuneration of banks´ retail deposits tends to be floored at zero, which limits the transmission of policy rate cuts to bank funding costs. We investigate whether this friction affects banks’ reactions under NIRP compared to a standard rate cut in the euro area. We argue that reliance on retail deposit funding and the level of excess liquidity holdings may increase banks’ responsiveness to NIRP. We find evidence that banks highly exposed to NIRP tend to grant more loans, i.e. NIRP is indeed expansionary for the levels of interest rates seen in the euro area so far. This confirms studies pointing to higher risk taking by banks under NIRP and sheds some new light on results that associate NIRP with a contraction in bank loans, albeit in specific market segments. We are the first to document the importance of banks’ excess liquidity holdings for the effectiveness of NIRP, pointing to a strong complementarity of NIRP with central bank liquidity injections, e.g. via asset purchases.
- JEL Code:
- E43,E52,G11,G21
- Network:
- N/A
- 20 May 2019
-
Working Paper Series - Issue No. 2282Details
- Abstract:
- This paper provides a quantitative assessment of the relative importance of global structural shocks for changes in financial conditions across a sample of emerging market economies. We disentangle four key drivers of global financial markets (oil supply shocks, global economic news shocks, US-specific economic news shocks and US monetary shocks) and show that these global factors account for about half of the variation in risky asset prices across EMEs. The influence of global factors for EME interest rates and currencies is much smaller, suggesting that factors beyond the identified global shocks (e.g. domestic or regional shocks) might be more important. In contrast to the recent literature on the global financial cycle which has emphasised the prominent role of US monetary policy, we find that although US monetary shocks have some influence in shaping EME financial markets, the broader global environment plays a significantly stronger role.
- JEL Code:
- E44,E52,G15
- 20 May 2019
-
Balance of payments (monthly)
- 17 May 2019
-
Working Paper Series - Issue No. 2281Details
- Abstract:
- We study the information flow from the ECB on policy dates since its inception, using tick data. We show that three factors capture about all of the variation in the yield curve but that these are different factors with different variance shares in the window that contains the policy decision announcement and the window that contains the press conference. We also show that the QE-related policy factor has been dominant in the recent period and that Forward Guidance and QE effects have been very persistent on the longer-end of the yield curve. We further show that broad and banking stock indices’ responses to monetary policy surprises depended on the perceived nature of the surprises. We find no evidence of asymmetric responses of financial markets to positive and negative surprises, in contrast to the literature on asymmetric real effects of monetary policy. Lastly, we show how to implement our methodology for any policy-related news release, such as policymaker speeches. To carry out the analysis, we construct the Euro Area Monetary Policy Event-Study Database (EA-MPD). This database, which contains intraday asset price changes around the policy decision announcement as well as around the press conference, is a contribution on its own right and we expect it to be the standard in monetary policy research for the euro area.
- JEL Code:
- E43,E44,E52,E58,G12,G14
Annexes- 17 May 2019
- 17 May 2019
- 17 May 2019
-
Occasional Paper Series - Issue No. 223Details
- Abstract:
- This paper summarises the outcomes of the analysis of the ECB Crypto-Assets Task Force. First, it proposes a characterisation of crypto-assets in the absence of a common definition and as a basis for the consistent analysis of this phenomenon. Second, it analyses recent developments in the crypto-assets market and unfolding links with financial markets and the economy. Finally, it assesses the potential impact of crypto-assets on monetary policy, payments and market infrastructures, and financial stability. The analysis shows that, in the current market, crypto-assets’ risks or potential implications are limited and/or manageable on the basis of the existing regulatory and oversight frameworks. However, this assessment is subject to change and should not prevent the ECB from continuing to monitor crypto-assets, raise awareness and develop preparedness.
- JEL Code:
- E42,G21,G23,O33
- 16 May 2019
-
SpeechDetails
- Subtitle:
- Speech by Benoît Cœuré, Member of the Executive Board of the ECB, at the 21st Geneva Conference on the World Economy, 16 May 2019
Annexes- 16 May 2019
-
Speech
- 16 May 2019
-
SpeechDetails
- Subtitle:
- Speech by Luis de Guindos, Vice-President of the ECB, at the occasion of the joint conference of the European Commission and the European Central Bank on European financial integration and stability, Brussels, 16 May 2019
- 15 May 2019
-
SpeechDetails
- Subtitle:
- Speech by Peter Praet, Member of the Executive Board of the ECB, Steptoe Brussels Open Conference Series, Brussels, 15 May 2019
- 15 May 2019
-
SpeechDetails
- Subtitle:
- Introductory remarks by Benoît Cœuré, Member of the Executive Board of the ECB, prior to an informal exchange of views with the Finance Committee of the National Assembly, Paris, 15 May 2019
- 15 May 2019
-
Working Paper Series - Issue No. 2280Details
- Abstract:
- In this paper, we study the effects of structural shocks that influence global risk – the main factor behind a “global capital flows cycle” – and how risk, in turn, is transmitted to capital flows. Our results show that not all the risk shocks driving the global financial cycle have the same effects on capital flows. Changes in global risk caused by pure financial shocks have the largest impact on the global configuration of capital flows, followed by US monetary policy shocks. As regards the transmission of risk to capital flows, we uncover a traditional “trilemma”, as countries more financially open and adopting a strict peg are more sensitive to global risk. This “trilemma” is mainly driven by one category of cross-border flows, “other investment”, confirming the importance of cross-border banking loans in the narrative of the global financial cycle.
- JEL Code:
- E42,E52,F31,F36,F41
- 15 May 2019
- 15 May 2019
-
Survey of Monetary Analysts
- 14 May 2019
-
Weekly financial statementAnnexes
- 14 May 2019
-
Weekly financial statement - Commentary
- 14 May 2019
-
Euro area securities issues statistics
- 13 May 2019
-
Press release
- 10 May 2019
-
SpeechDetails
- Subtitle:
- Speech by Benoît Cœuré, Chair of the Bank for International Settlements’ Committee on Payments and Market Infrastructures and Member of the Executive Board of the European Central Bank, at the G7 conference: “Cybersecurity: Coordinating efforts to protect the financial sector in the global economy”, Paris, 10 May 2019
- 10 May 2019
-
Working Paper Series - Issue No. 2279Details
- Abstract:
- We study the relationship between monetary policy and long-term rates in a structural, general equilibrium model estimated on both macro and yields data from the United States. Regime shifts in the conditional variance of productivity shocks, or "uncertainty shocks", are an important model ingredient. First, they account for countercyclical movements in risk premia. Second, they induce changes in the demand for precautionary saving, which affects expected future real rates. Through changes in both risk-premia and expected future real rates, uncertainty shocks account for about 1/2 of the variance of long-term nominal yields over long horizons. The remaining driver of long-term yields are changes in inflation expectations induced by conventional, autoregressive shocks. Long-term inflation expectations implied by our model are in line with those based on survey data over the 1980s and 1990s, but less strongly anchored in the 2000s.
- JEL Code:
- C11,C34,E40,E43,E52
- 10 May 2019
-
Euro money market statistics
- 10 May 2019
-
SpeechDetails
- Subtitle:
- Statement by Sabine Lautenschläger, Member of the Executive Board of the ECB, at the G7 2019 conference on "Cybersecurity: Coordinating efforts to protect the financial sector in the global economy", Paris, 10 May 2019
- 10 May 2019
-
SpeechDetails
- Subtitle:
- Video address by Peter Praet, Member of the Executive Board of the ECB, at the conference “Future Europe”, Frankfurt am Main, 10 May 2019
- 8 May 2019
-
InterviewDetails
- Subtitle:
- Interview with Benoît Cœuré, Member of the Executive Board of the ECB, published on 8 May 2019
- 7 May 2019
-
Weekly financial statementAnnexes
- 7 May 2019
-
Weekly financial statement - Commentary
- 6 May 2019
-
Working Paper Series - Issue No. 2278Details
- Abstract:
- This paper explores monetary-macroprudential policy interactions in a simple, calibrated New Keynesian model incorporating the possibility of a credit boom precipitating a financial crisis and a loss function reflecting financial stability considerations. Deploying the countercyclical capital buffer (CCyB) improves outcomes significantly relative to when interest rates are the only instrument. The instruments are typically substitutes, with monetary policy loosening when the CCyB tightens. We also examine when the instruments are complements and assess how different shocks, the effective lower bound for monetary policy, market-based finance and a risk-taking channel of monetary policy affect our results.
- JEL Code:
- E52,E58,G01,G28
- Network:
- Research Task Force (RTF)
- 6 May 2019
-
Working Paper Series - Issue No. 2277Details
- Abstract:
- Using household survey data, we document evidence of a loosening of credit standards in Euro area countries that experienced a property price boom-and-bust cycle. Borrowers in these countries exhibited significantly higher loan-to-value (LTV) and loan-to-income (LTI) ratios in the run up to the financial crisis, and an increasing tendency towards longer-term loans compared to borrowers in other countries. In recent years, despite the long period of historically low interest rates and substantial house price increases in some countries, we do not find similar credit easing as before the crisis. Instead, we find evidence of a considerable change in borrower characteristics since 2010: new borrowers are older and have higher incomes than before the crisis.
- JEL Code:
- E5,G01,G17,G28,R39
- Network:
- Household Finance and Consumption Network (HFCN)
- 6 May 2019
-
MFI interest rate statistics
- 6 May 2019
-
SpeechDetails
- Subtitle:
- Welcome address by Sabine Lautenschläger, Member of the Executive Board of the ECB, at the ECB conference “An innovative single market for the euro”, Frankfurt am Main, 6 May 2019
- 3 May 2019
-
Working Paper Series - Issue No. 2276Details
- Abstract:
- Using newly available information on euro area sectoral holdings of securities, this paper investigates to what extent the presence of institutional investors affects volatility and liquidity in secondary bank bond markets. We find that non-bank financial intermediaries, in particular money market funds (MMFs), have a positive impact on secondary bank bond markets’ liquidity conditions, at the cost of significantly increasing volatility of daily returns. The effect translates to more than a 19% improvement in liquidity conditions and up to 57% increase in daily-return volatility, assuming MMFs hold about 10% of the notional amount in the secondary market of a representative euro area bank bond. The effect is relative to the impact the non-financial private sector has on markets. Investment funds, insurance corporations and pension funds are found to similarly affect market conditions, though to a lesser magnitude. We find a trade-off between volatility and liquidity, where the stronger presence of institutional investors at the same time improves liquidity and increases volatility. The results suggest that possible structural shifts in investor composition matter for market conditions and should be monitored by financial stability authorities.
- JEL Code:
- G10,G15,G23
- 3 May 2019
-
Occasional Paper Series - Issue No. 222Details
- Abstract:
- As the euro area has a predominantly bank-based financial system, changes in the composition and strength of banks’ balance sheets can have very sizeable implications for the transmission of monetary policy. This paper provides an overview of developments in banks’ balance sheets, profitability and risk-bearing capacity and analyses their relevance for monetary policy. We show that, while the transmission of standard policy interest rate cuts to firms and households was diminished during the crisis, in a context of financial market stress and weak bank balance sheets, unconventional monetary policy measures have helped to restore monetary policy transmission and pass-through to interest rates. We also document the extent to which these non-standard measures were successful in stimulating lending and which bank business models were more strongly affected. Finally, we show that the estimated impact of recent monetary policy measures on bank profitability does not appear to be particularly strong when all the effects on the macroeconomy and asset quality are taken into account
- JEL Code:
- E4,E43,E5,E52,G20,G21
- 2 May 2019
- 2 May 2019
- 2 May 2019
- 2 May 2019
- 2 May 2019
- 1 May 2019
-
SpeechDetails
- Subtitle:
- Speech by Luis de Guindos, Vice-President of the ECB, OMFIF City Lecture, London, 1 May 2019
- 30 April 2019
-
Weekly financial statementAnnexes
- 30 April 2019
-
Weekly financial statement - Commentary
- 30 April 2019
-
Working Paper Series - Issue No. 2275Details
- Abstract:
- In this paper we investigate the impact of the euro integration process on the drivers of FDI inflows. We show theoretically and empirically that the single currency alters the drivers of FDI inflows across its Member States. Estimating bilateral gravity models of FDI inflows into euro area countries, we show that the euro facilitates intra-euro area vertical FDI flows but reduces incentives for horizontal or market seeking FDI. Instead, horizontal FDI flows stemming from investor countries located outside the monetary union increase. Such flows are however not more likely be directed towards euro area countries with larger domestic markets but rather to countries that are close to large euro area markets and that have higher quality institutions. Overall, these results suggest that while the euro has been beneficial to FDI inflows into the monetary union, the impact differs significantly across countries. The global financial crisis does not change our main findings. Our results are robust to various economic specifications.
- JEL Code:
- F21,F23,F45,O43
- 30 April 2019
-
Occasional Paper Series - Issue No. 221Details
- Abstract:
- The studies summarised in this paper focus on the economic implications of euro area firms’ participation in global value chains (GVCs). They show how, and to what extent, a large set of economic variables and inter-linkages have been affected by international production sharing. The core conclusion is that GVC participation has major implications for the euro area economy. Consequently, there is a case for making adjustments to standard macroeconomic analysis and forecasting for the euro area, taking due account of data availability and constraints.
- JEL Code:
- F6,F10,F14,F16,E3
- 30 April 2019
-
Research Bulletin - Issue No. 57Details
- Abstract:
- Money markets are an important source of short-term funding for banks, which rely heavily on them to cover their liquidity needs. But when money markets do not function smoothly, banks may have to de-leverage or increase their holdings of liquid assets, leading to a decline in lending and output. This decline can be mitigated by central banks if they increase the size of their balance sheets.
- JEL Code:
- G10,G20,E44,E52,E58
- Network:
- Research Task Force (RTF)
- 30 April 2019
-
Press releaseAnnexes
- 30 April 2019
-
Survey on credit terms and conditions in euro-denominated securities financing and OTC derivatives markets
- 29 April 2019
-
Working Paper Series - Issue No. 2274Details
- Abstract:
- This paper investigates the behaviour of credit rating agencies (CRAs) using a natural experiment in monetary policy. Specifically, we exploit the corporate QE of the Eurosystem and its rating-based specific design which generates exogenous variation in the probability for a bond of becoming eligible for outright purchases. We show that after the launch of the policy, rating upgrades were mostly noticeable for bonds initially located below, but close to, the eligibility frontier. In line with the theory, rating activity is concentrated precisely on the territory where the incentives of market participants are expected to be more sensitive to the policy design. Complementing the evidence on the effectiveness of non-standard measures, our findings contribute to better assessing the consequences of the explicit (but not exclusive) reliance on CRAs ratings by central banks when designing monetary policy.
- JEL Code:
- E44,E52,E58,G24,G30
- 29 April 2019
-
Euro area economic and financial developments by institutional sector (full)
- 29 April 2019
-
Monetary developments in the euro area
- 26 April 2019
-
Working Paper Series - Issue No. 2273Details
- Abstract:
- We present new evidence on the structure of euro area securities markets using a multilayer network approach. Layers are broken down by key instruments and maturities as well as the secured nature of the transaction. This paper utilizes a unique dataset of banking sector crossholdings of securities to map these exposures among banks and economic and financial sectors. We can compare and contrast funding and exposure networks among banks themselves and of banks, non-banks and the wider economy. The analytical approach presented here is highly relevant for the design of appropriate prudential measures, since it supports the identification of counterparty risk, concentration risk and funding risk within the interbank network and the wider macro-financial network.
- JEL Code:
- D85,E44,G21,L14
- 26 April 2019
-
Working Paper Series - Issue No. 2272Details
- Abstract:
- We study the effects of monetary shocks in a model of state-dependent price and wage adjustment based on “control costs”. Suppliers of retail goods and of labor are both monopolistic competitors that face idiosyncratic productivity shocks and nominal rigidities. Stickiness arises because precise decisions are costly, so agents choose to tolerate small errors in the timing of adjustments. Our simulations are calibrated to microdata on the size and frequency of price and wage changes. Money shocks have less persistent real effects in our state-dependent model than they would a time-dependent framework, but nonetheless we obtain sufficient monetary nonneutrality for consistency with macroeconomic evidence. Nonneutrality is primarily driven by wage rigidity, rather than price rigidity. State-dependent nominal rigidity implies a flatter Phillips curve as trend inflation declines, because nominal adjustments become less frequent, making short-run inflation less reactive to shocks.
- JEL Code:
- E31,D81,C73
- 25 April 2019
-
Economic Bulletin - BoxEconomic Bulletin Issue 3, 2019Details
- Abstract:
- The evidence presented in this box suggests that the leading and pro-cyclical properties of real M1 for real GDP remain a robust stylised fact for the euro area. Moreover, the box documents that these properties seem to reflect the information content of narrow money, beyond the influence of interest rates. Finally, the box presents model-based evidence indicating that despite the recent deceleration, recent real M1 developments do not point to risks of a recession in the euro area up to early 2020.
- JEL Code:
- E32,E44,E47,E51
- 25 April 2019
-
Economic Bulletin - BoxEconomic Bulletin Issue 3, 2019Details
- Abstract:
- This box presents a methodology to disentangle four main drivers of EMEs currencies swings: spillovers from US shocks, global risk appetite, interest rate effects and idiosyncratic domestic shocks. The main finding is that while the sell-off - between January and August 2018 - was mainly related to US and global risk factors, the recovery since then is driven by improved domestic conditions.
- JEL Code:
- F31
- 25 April 2019
-
Economic Bulletin - BoxEconomic Bulletin Issue 3, 2019Details
- Abstract:
- This box reviews basic characteristics of the Asian tech sector and shows that it has played an important role in the recent weakness in China’s trade. It also suggests that the trend in the global tech cycle associated with weaker trade in Asia may be bottoming out.
- JEL Code:
- E32,F44
- 25 April 2019
-
Economic Bulletin
- 24 April 2019
-
Weekly financial statementAnnexes
- 24 April 2019
-
Weekly financial statement - Commentary
- 24 April 2019
-
Economic Bulletin - ArticleEconomic Bulletin Issue 3, 2019Details
- Abstract:
- The risk of a trade war came sharply into focus in 2018, as protectionist threats by the US Administration and its trading partners were followed by concrete actions. Tensions rose over the summer and, while these have been defused on some fronts, the risk of further escalation remains material. The impact of the measures implemented so far on the global and euro area economic outlooks is expected to remain contained. However, the negative impact could become much greater if trade tensions were to escalate further. Uncertainty related to protectionism is weighing on economic sentiment and it may raise further, potentially eroding confidence and affecting the euro area and the global economy more significantly. The complexity of intertwined international production chains could also magnify the impact. Against this backdrop, this article reviews the changes in the trade policy landscape over the past decade. It discusses the macroeconomic implications of the recent surge in protectionism and evaluates the possible effects that an escalation in trade tensions could have on the global economy and the euro area.
- JEL Code:
- F13,F14
- 23 April 2019
-
Working Paper Series - Issue No. 2271Details
- Abstract:
- We identify the effects of exogenous credit constraints on firm ability to attract and retain skilled workers. To do so, we exploit a shock to the value of the pension obligations of Portuguese banks resulting from a change in accounting norms. Using bank-firm credit exposures that we match with a census of all Portuguese employees, we show that firms in a relationship with affected banks borrow less and reduce employment mostly of high-skilled workers. High-skilled workers are more likely to exit and less likely to join affected firms. Overall, credit market frictions might have long lasting effects on firm productivity and growth through firm accumulation of human capital.
- JEL Code:
- G21,J21,J24
- Network:
- ECB Lamfalussy Fellowship Programme
- 23 April 2019
-
Economic Bulletin - ArticleEconomic Bulletin Issue 3, 2019Details
- Abstract:
- This article compares the fiscal rule framework in the euro area with the frameworks in the fiscally more integrated United States and Switzerland, with the aim of drawing lessons for ways in which fiscal rules could be reformed in European Economic and Monetary Union (EMU). Both the United States and Switzerland have a history of balanced budget rules that help stabilise government debt in individual states/cantons at moderate and broadly comparable levels. The recent shift towards balanced budget rules in the euro area is an important achievement in this direction, and has contributed to better average underlying budgetary positions. Still, the fiscal rule framework needs to be rendered more effective in reducing high levels of government debt and their dispersion across the euro area. Reducing the heterogeneity of government debt positions is also an important prerequisite for setting up a well-governed common macroeconomic stabilisation function at the centre of EMU in case of deep economic crises. This in turn would help to contain the procyclicality of fiscal rules at the country level.
- JEL Code:
- H61,H74,H77
- 23 April 2019
-
Economic Bulletin - BoxEconomic Bulletin Issue 3, 2019Details
- Abstract:
- Over the course of 2018, euro area non-financial corporate (NFC) spreads widened notably. This box explores the factors underpinning this widening, including deteriorating corporate credit fundamentals, a weaker macroeconomic outlook, spillovers from abroad and a reassessment of global risk appetite. Most importantly, against the backdrop of the end of net asset purchases in December 2018, the box also focuses on the role that monetary policy has played.
- JEL Code:
- E52,E58,G01,G12,G21,G28
- 23 April 2019
-
InterviewDetails
- Subtitle:
- Interview with Benoît Cœuré, Member of the Executive Board of the ECB, conducted by Johannes Pennekamp and Philip Plickert on 17 April 2019 and published on 23 April 2019
- 18 April 2019
-
Working Paper Series - Issue No. 2270Details
- Abstract:
- We use cross-country microdata to analyse the risk taking of households in Europe and the US. Concerning the extensive as well as the intensive margin of risky assets, European households differ substantially from US households; but also inside Europe we document substantial differences. Furthermore, average risk aversion is strongly correlated with the share of households holding risky assets across countries. We decompose the observed differences into two parts. A part explainable by household characteristics as well as differences in risk aversion and a remainder. We employ the unexplained part resulting from our microeconometric decomposition analysis together with country-level variables on the economic environment to relate observed differences in risky asset holdings to institutional ones. We find that institutional differences such as shareholder protection are strongly correlated with the unexplainable differences with regard to holdings of risky assets.
- JEL Code:
- D12,D14,D31,G11
- Network:
- Household Finance and Consumption Network (HFCN)
- 18 April 2019
-
Working Paper Series - Issue No. 2269Details
- Abstract:
- We use firm-level survey data from 25 EU countries to analyse how firms adjust their labour costs (employment, wages and hours) in response to shocks. We develop a theoretical model to understand how firms choose between different ways to adjust their labour costs. The basic intuition is that firms choose the cheapest way to adjust labour costs. Our empirical findings are in line with the theoretical model and show that the pattern of adjustment is not much affected by the type of the shock (demand shock, access-to-finance shock, ‘availability of supplies’ shock), but differs according to the direction of the shock (positive or negative), its size and persistence. In 2010-13, firms responding to negative shocks were most likely to reduce employment, then hourly wages and then hours worked, regardless of the source of the shock. Results for the 2008-09 period indicate that the ranking might change during deep recession as the likelihood of wage cuts increases. In response to positive shocks in 2010-13, firms were more likely to increase wages, followed by increases in employment and then hours worked suggesting an asymmetric reaction to positive and negative shocks. Finally, we show that strict employment protection legislation and high centralisation or coordination of wage bargaining make it less likely that firms reduce wages when facing negative shocks.
- JEL Code:
- D21,D22,D24
- Network:
- Wage dynamics network
- 17 April 2019
-
SpeechDetails
- Subtitle:
- Panel remarks by Sabine Lautenschläger, Member of the Executive Board of the ECB, at the Network for Greening the Financial System Conference, in Paris, France, 17 April 2019
- 17 April 2019
-
Working Paper Series - Issue No. 2268Details
- Abstract:
- This paper analyzes the impact of monetary policy on public debt sustainability through the lens of a general equilibrium model with fiscal limits. We find that the mere possibility of a binding ZLB may have detrimental effects on debt sustainability, as a kink in the Laffer curve induces a dead-weight loss in the present discounted value of future primary surpluses. Moreover, debt sustainability improves with monetary policy activeness, that is, with the elasticity of the interest rate to changes in inflation and the output gap. On this basis, we assess the trade-off between economic stabilization and debt sustainability depending on the monetary policy environment. In normal times, large public spending shocks may engender perverse debt dynamics and cause economic contractions. At the ZLB, a muted trade-off between stabilization and sustainability instead expands the fiscal margin, especially if coupled with a commitment to a more active monetary policy during normal times.
- JEL Code:
- E52,E61,E63
- 17 April 2019
-
Working Paper Series - Issue No. 2267Details
- Abstract:
- We assess the empirical validity of the trilemma (or impossible trinity) in the 2000s for a large sample of advanced and emerging economies. To do so, we estimate Taylor-rule type monetary policy reaction functions, relating the local policy rate to real-time forecasts of domestic fundamentals, global variables, as well as the base-country policy rate. In the regressions, we explore variations in the sensitivity of local to base-country policy rates across different degrees of exchange rate flexibility and capital controls. We find that the data are in general consistent with the predictions from the trilemma: Both exchange rate flexibility and capital controls reduce the sensitivity of local to base-country policy rates. However, we also find evidence that is consistent with the notion that the financial channel of exchange rates highlighted in recent work reduces the extent to which local policymakers decide to exploit the monetary autonomy in principle granted by flexible exchange rates in specific circumstances: The sensitivity of local to base-country policy rates for an economy with a flexible exchange rate is stronger when it exhibits negative foreign-currency exposures which stem from portfolio debt and bank liabilities on its external balance sheet and when base-country monetary policy is tightened. The intuition underlying this finding is that it may be optimal for local monetary policy to mimic the tightening of base-country monetary policy and thereby mute exchange rate variation because a depreciation of the local currency would raise the cost of servicing and rolling over foreign-currency debt and bank loans, possibly up to a point at which financial stability is put at risk.
- JEL Code:
- F42,E52,C50
- 17 April 2019
-
Other publication - Issue No. 2019
- 17 April 2019
-
Balance of payments (monthly)
- 16 April 2019
-
Weekly financial statementAnnexes
- 16 April 2019
-
Weekly financial statement - Commentary
- 16 April 2019
-
Working Paper Series - Issue No. 2266Details
- Abstract:
- We develop a new theory of information production during credit booms. In our model, entrepreneurs need credit to undertake investment projects, some of which enable them to divert resources towards private consumption. Lenders can protect themselves from such diversion in two ways: collateralization and costly screening, which generates durable information about projects. In equilibrium, the collateralization-screening mix depends on the value of aggregate collateral. High collateral values raise investment and economic activity, but they also raise collateralization at the expense of screening. This has important dynamic implications. During credit booms driven by high collateral values (e.g. real estate booms), the economy accumulates physical capital but depletes information about investment projects. As a result, collateral-driven booms end in deep crises and slow recoveries: when booms end, investment is constrained both by the lack of collateral and by the lack of information on existing investment projects, which takes time to rebuild. We provide new empirical evidence using US firm-level data in support of the model's main mechanism.
- JEL Code:
- E32,E44,G01,D80
- 16 April 2019
-
Working Paper Series - Issue No. 2265Details
- Abstract:
- We examine gender differences in career progression and promotions in central banking, a stereotypical male-dominated occupation, using confidential anonymized personnel data from the European Central Bank (ECB) during the period 2003-2017. A wage gap emerges between men and women within a few years of hiring, despite broadly similar entry conditions in terms of salary levels and other observables. We also find that women are less likely to be promoted to a higher salary band up until 2010 when the ECB issued a public statement supporting diversity and took several measures to support gender balance. Following this change, the promotion gap disappears. The gender promotion gap prior to this policy change is partly driven by the presence of children. Using 2012-2017 data on promotion applications and decisions, we explore the promotion process in depth, and confirm that during this most recent period women are as likely to be promoted as men. This results from a lower probability of women to apply for promotion, combined with a higher probability of women to be selected conditional on having applied. Following promotion, women perform better in terms of salary progression, suggesting that the higher probability to be selected is based on merit, not positive discrimination.
- JEL Code:
- J16,J31,J41,J63
- 15 April 2019
-
Working Paper Series - Issue No. 2264Details
- Abstract:
- We assess the impact of the corporate sector purchase programme (CSPP), the corporate arm of the ECB's quantitative easing, over its first year of activity (June 2016 - June 2017). Focusing on the primary bond market, we find evidence of a significant impact of the CSPP on yield spreads, both directly on purchased and targeted bonds and indirectly on all other bonds.The magnitude and the timing of the changes in yield spreads, coupled with the evolution of bond placements, are fully consistent with the proper unfolding the portfolio rebalancing channel.
- JEL Code:
- G15,G32,G38
- 15 April 2019
-
Working Paper Series - Issue No. 2263Details
- Abstract:
- Central banks have used different types of forward guidance, where the forward guidance horizon is related to a state contingency, a calendar date or left open-ended. This paper reports cross-country evidence on the impact of these different types of forward guidance on the sensitivity of bond yields to macroeconomic news, and on forecaster disagreement about the future path of interest rates. We show that forward guidance mutes the response to macroeconomic news in general, but that calendar-based forward guidance with a short horizon counterintuitively raises it. Using a model where agents learn from market signals, we show that the release of more precise public information about future rates lowers the informativeness of market signals and, as a consequence, may increase uncertainty and amplify the reaction of expectations to macroeconomic news. However, when the increase in precision of public information is sufficiently large, uncertainty is unambiguously reduced.
- JEL Code:
- D83,E43,E52,E58
- 12 April 2019
-
SpeechDetails
- Subtitle:
- Statement by Mario Draghi, President of the ECB, at the thirty-ninth meeting of the International Monetary and Financial Committee, Washington, D.C., 12 April 2019
- 12 April 2019
-
Governing Council decisions - Other decisions
- 12 April 2019
-
Working Paper Series - Issue No. 2262Details
- Abstract:
- While the consequences and effectiveness of IMF conditionality have long been the focus of research, the possible negative impact of IMF conditionality on countries’ willingness to ask for an IMF programme – often termed ‘IMF stigma’ – has recently received attention particularly from policy circles. In this paper we investigate how countries' past experience with the IMF and their peers’ experience with the IMF affect their likelihood of entering a subsequent IMF arrangement. Our results indicate that, even when controlling for the success of past programmes, a country is less likely to approach the IMF for help if in the past it experienced an above-average number of disbursement-relevant conditions. We find hardly any impact of peers’ experience, except for Asian countries.
- JEL Code:
- F33,F53,F55,H87
- 12 April 2019
-
Working Paper Series - Issue No. 2261Details
- Abstract:
- The paper proposes a framework for assessing the impact of system-wide and bank-level capital buffers. The assessment rests on a factor-augmented vector autoregression (FAVAR) model that relates individual bank adjustments to macroeconomic dynamics. We estimate FAVAR models individually for eleven euro area economies and identify structural shocks, which allow us to diagnose key vulnerabilities of national banking systems and estimate short-run economic costs of increasing banks’ capitalisation. On this basis, we run a fully-fledged cost-benefit assessment of an increase in capital buffers. The benefits are related to an increase in bank resilience to adverse shocks. Higher capitalisation allows banks to withstand negative shocks and moderates the reduction of credit to the real economy that ensues in adverse circumstances. The costs relate to transitory credit and output losses that are assessed both on an aggregate and bank level. An increase in capital ratios is shown to have a sharply different impact on credit and economic activity depending on the way banks adjust, i.e. via changes in assets or equity.
- JEL Code:
- E51,G21,G28
- 11 April 2019
-
Press releaseRelated
- 11 April 2019
-
Survey of Professional Forecasters
- 11 April 2019
-
Survey of Professional ForecastersAnnexes
- 11 April 2019
Related- 11 April 2019
- 10 April 2019
-
Monetary policy statementDetails
- Subtitle:
- Mario Draghi, President of the ECB,Luis de Guindos, Vice-President of the ECB,Frankfurt am Main, 10 April 2019
- 10 April 2019
-
Monetary policy decision
- 10 April 2019
-
Euro area securities issues statistics
- 9 April 2019
- 9 April 2019
-
Weekly financial statementAnnexes
- 9 April 2019
-
Weekly financial statement - Commentary
- 9 April 2019
-
Euro area bank lending survey - Issue No. 2018Annexes
- 9 April 2019
-
Euro area bank lending survey - Annex
Related- 9 April 2019
-
Press release
- 9 April 2019
-
Press releaseRelated
- 9 April 2019
-
Euro area bank lending survey - Issue No. 2018
- 6 April 2019
-
SpeechDetails
- Subtitle:
- Panel contribution by Yves Mersch, Member of the Executive Board of the ECB, at The Outlook for the Economy and Finance conference, Cernobbio, 6 April 2019
- 4 April 2019
-
Monetary policy account
- 4 April 2019
-
Euro area economic and financial developments by institutional sector (early)
- 4 April 2019
-
Balance of payments (quarterly)
- 4 April 2019
- 3 April 2019
-
Weekly financial statementAnnexes
- 3 April 2019
-
Weekly financial statement - Commentary
- 3 April 2019
-
MFI interest rate statistics
- 2 April 2019
-
Euro money market statistics
- 2 April 2019
-
InterviewDetails
- Subtitle:
- Interview with Benoît Cœuré, Member of the Executive Board of the ECB, conducted by Jean-Hervé Lorenzi, François-Xavier Albouy, Arnaud Chneiweiss, Pierre-Charles Pradier and Philippe Trainar, on 4 February 2019 and published on 2 April 2019
- 1 April 2019
-
SpeechDetails
- Subtitle:
- Introductory remarks by Luis de Guindos, Vice-President of the ECB, Brussels, 1 April 2019
Related- 1 April 2019
-
Annual Report
- 1 April 2019
-
Annual ReportRelated
- 21 March 2019
-
Annual Report - Statistical annex
- 21 February 2019
-
Annual Accounts
- 1 April 2019
-
Other publication
- 1 April 2019
- 31 March 2019
- 1 April 2019
-
Other publicationRelated
- 31 March 2019
- 1 April 2019
-
Annual Report
- 1 April 2019
-
InterviewDetails
- Subtitle:
- Interview with Sabine Lautenschläger, Member of the Executive Board of the ECB, conducted by András Szigètvari on 27 March 2019 and published on 1 April 2019
- 31 March 2019
-
Feedback on the input provided by the European Parliament as part of its resolution on the ECB’s Annual ReportRelated
- 1 April 2019
-
Other publication
- 1 April 2019
-
Annual Report
- 29 March 2019
-
Working Paper Series - Issue No. 2260Details
- Abstract:
- We analyse the interaction between monetary and macroprudential policies in the euro area by means of a two-country DSGE model with financial frictions and cross-border spillover effects. We calibrate the model for the four largest euro area countries (i.e. Germany, France, Italy, and Spain), with particular attention to the calibration of cross-country financial and trade linkages and country specific banking sector characteristics. We find that countercyclical macroprudential interventions are supportive of mon-etary policy conduct through the cycle. This complementarity is significantly reinforced when there are asymmetric financial cycles across the monetary union, which provides a case for targeted country-specific macroprudential policies to help alleviate the burden on monetary policy. At the same time, our findings point to the importance of taking into account cross-border spillover effects of macroprudential measures within the Monetary Union.
- JEL Code:
- E32,E44,E52,F36,F41
- Network:
- Research Task Force (RTF)
- 29 March 2019
-
SpeechDetails
- Subtitle:
- Speech by Benoît Cœuré at the Banque de France Symposium & 34th SUERF Colloquium on the occasion of the 20th anniversary of the euro on “The Euro Area: Staying the Course through Uncertainties”, Paris, 29 March 2019
Annexes- 29 March 2019
-
Speech
- 29 March 2019
-
InterviewDetails
- Subtitle:
- Interview of Peter Praet, Member of the Executive Board of the ECB, conducted by Jana Randow on 27 March 2019 and broadcast on 28 March 2019
- 28 March 2019
-
Monetary developments in the euro area
- 28 March 2019
-
Letters to MEPs
- 28 March 2019
- 28 March 2019
- 28 March 2019
- 28 March 2019
- 28 March 2019
- 27 March 2019
-
Working Paper Series - Issue No. 2259Details
- Abstract:
- Through the euro area crisis, financial fragmentation across jurisdictions became a prime concern for the single monetary policy. The ECB broadened the scope of its instruments and enacted a series of non-standard measures to engineer an appropriate degree of policy accommodation. The transmission of these measures through the currency union remained highly dependent on the financial structure and conditions prevailing in various regions. This paper explores the country-specific macroeconomic transmission of selected non-standard measures from the ECB using a global DSGE model with a rich financial sector: we extend the six-region multi-country model of Darracq Pariès et al. (2016), introducing credit and exchange rate channels for central bank asset purchases. The portfolio rebalancing frictions are calibrated to match the sovereign yield and exchange rate responses after ECB's Asset Purchase Programme (APP) first announcement. The domestic transmission of the APP through the credit intermediation chain is significant and quite heterogenous across the largest euro area countries. The introduction of global portfolio frictions on euro area government bond holdings by international investors opens up for a larger depreciation of the euro. The interaction between international and domestic channels affect the magnitude and the cross-country distribution of the APP impact.
- JEL Code:
- E4,E5,F4
- 27 March 2019
-
Working Paper Series - Issue No. 2258Details
- Abstract:
- This paper employs an aggregate representation of an overlapping generation (OLG) model quantifying a decrease of the natural real interest rate in the range of -1.7 and -0.4 percentage points in the euro area between 1990 and 2030 due to demographics alone. Two channels contribute to this downward impact: the increasing scarcity of effective labor input and the increasing willingness to save by individuals due to longer life expectancy. The decrease of the aggregate saving rate as individuals retire has an upward impact which is never strong enough. Mitigating factors are: higher substitutability between labor and capital, higher intertemporal elasticity of substitution in consumption, reforms aiming at increasing the relative productivity of older cohorts, the participation rate and the retirement age. The simulated path of the natural real interest rate is consistent with recent econometric estimates: an upward trend in the 70s and 80s and a prolonged decline afterward.
- JEL Code:
- E17,E21,E43,E52,J11
- 27 March 2019
-
Macroprudential Bulletin - Foreword - Issue No. 7
- 27 March 2019
-
Macroprudential Bulletin - Article - Issue No. 7Details
- Abstract:
- This study analyses whether the ability of the euro area banking system to withstand potential shocks while minimising taxpayers’ costs has changed in the ten years since the financial crisis as a consequence of the impact of post-crisis reforms on bank capital and loss-absorbing capacity. The results show that the average probability of default of banks decreased from 3.5% in 2007 to 1.1% in 2017, less than a third of its pre-crisis value. In addition, under conservative assumptions on the scope of liabilities affected by the bail-in tool, banks’ loss-absorbing capacity has increased from 7.2% to 12.0% of total assets owing to the introduction of larger capital buffers and the new resolution framework, which enhances banks’ loss-absorbing capacity via the bail-in tool. Finally, the potential intervention of the Single Resolution Fund has further increased the loss-absorbing capacity of the system to 16.9% of total assets. Considering all these three factors, the ability of the banking system to absorb losses while minimising costs to taxpayers has increased more than 3-fold over the last ten years. When considering a broader scope for the bail-in tool, the system’s loss-absorbing capacity has increased to 55.5% of total assets, which corresponds to an overall 12-fold increase in its ability to absorb losses while minimising taxpayers’ costs.
- JEL Code:
- G01,G21,G28
- 27 March 2019
-
Macroprudential Bulletin - Article - Issue No. 7Details
- Abstract:
- The macroprudential stress test of the euro area banking system examines the effects of the baseline and adverse scenarios on the 91 largest euro area credit institutions across 19 countries. The analysis looks at the financial system as a whole and acknowledges the interdependencies between banks and the real economy. In particular, it takes into account banks’ reaction to changing economic conditions and to deterioration in their balance sheets. The results indicate substantial resilience of the euro area banking system at the current juncture. The macroprudential stress test predicts a lower negative impact on capital ratios, though higher capital depletion, in billions of euro, than a static balance-sheet stress test. It also shows that banks’ deleveraging tied to deteriorating capitalisation and asset quality leads to further deterioration in economic conditions in an adverse scenario.
- JEL Code:
- E37,E58,G21,G28
- 27 March 2019
-
Macroprudential Bulletin - Article - Issue No. 7Details
- Abstract:
- This article presents the ECB framework for assessing financial stability risks stemming from residential real estate markets and for designing macroprudential policy responses. It reviews recent developments in residential real estate markets and policy initiatives to address risks.
- JEL Code:
- G01,G21,G28,R30
- 27 March 2019
-
Macroprudential Bulletin - Article - Issue No. 7Details
- Abstract:
- When living by the ocean, instead of trying to calm the waves and tides, building a levee or a breakwater is the safest option. This article reviews the country-specific strategic choices and decisions regarding timing and calibration of the countercyclical capital buffer (CCyB) in countries participating in the Single Supervisory Mechanism (SSM). It identifies commonalities across countries and country specificities that influence decisions by national designated authorities. In so doing, it summarises the limitations encountered with the credit-to-GDP gap and the role of other indicators and factors in calibrating the appropriate CCyB rate on the basis of “guided discretion”. Ultimately, assessing risks across euro area countries consistently, while taking into account country-specific factors, supports the effective use of the CCyB as a macroprudential instrument and ensures that similar risk exposures are subject to the same set of macroprudential requirements.
- JEL Code:
- G21,G28,E58,F42
- 27 March 2019
-
SpeechDetails
- Subtitle:
- Speech by Yves Mersch, Member of the Executive Board of the ECB, at The ECB and its Watchers XX conference, Frankfurt am Main, 27 March 2019
- 27 March 2019
-
Macroprudential Bulletin - Annex - Issue No. 7
- 27 March 2019
-
SpeechDetails
- Subtitle:
- Speech by Luis de Guindos, Vice-President of the ECB, at The ECB and Its Watchers XX conference, Frankfurt am Main, 27 March 2019
- 27 March 2019
-
Working Paper Series - Issue No. 2257Details
- Abstract:
- We estimate the natural rate of interest for the US and the euro area in a semi-structural model comprising a Taylor rule. Our estimates feature key elements of Laubach and Williams (2003), but are more consistent with using conventional policy rules: we model inflation to be stationary, with the output gap pinning down deviations of inflation from its objective (rather than relative to a random walk). We relax some constraints on the correlation of latent factor shocks to make the original unobserved-components framework more amenable to structural interpretation and to reduce filtering uncertainty. We show that resulting natural rate metrics are more consistent with estimates from structural models.
- JEL Code:
- C11,E32,E43,E52
- 27 March 2019
-
Working Paper Series - Issue No. 2256Details
- Abstract:
- We analyze the pledging behavior of Euro area banks during the introduction of the liquidity coverage ratio (LCR). The LCR considers only a subset of central bank eligible assets and thereby offers banks an arbitrage opportunity to improve their regulatory ratio by altering their collateral pledging with the European Central Bank. We use the existence of national liquidity requirements to proxy for banks’ incentives to exploit this differential treatment of central bank eligible assets. Using security-level information on collateral pledged with the central bank, we find that banks without a preceding national liquidity requirement pledge more and less liquid collateral than banks with a preceding national liquidity requirement after the LCR introduction. We attribute the difference across banks to a preparation effect of the liquidity regulation on the national level.
- JEL Code:
- G21,G28,E42,E52,E58
- 27 March 2019
-
SpeechDetails
- Subtitle:
- Statement by Sabine Lautenschläger, Member of the Executive Board of the ECB, at the 10 Years Vienna Initiative - Anniversary Conference 2019, in Vienna, Austria, 27 March 2019
- 27 March 2019
-
SpeechDetails
- Subtitle:
- Remarks by Peter Praet, Member of the Executive Board of the ECB, at The ECB and Its Watchers XX Conference, Frankfurt am Main, 27 March 2019
- 27 March 2019
-
SpeechDetails
- Subtitle:
- Speech by Mario Draghi, President of the ECB, at the conference 'The ECB and Its Watchers XX', Frankfurt am Main, 27 March 2019
- 26 March 2019
-
Weekly financial statementAnnexes
- 26 March 2019
-
Weekly financial statement - Commentary
- 26 March 2019
-
Working Paper Series - Issue No. 2255Details
- Abstract:
- This paper explores a natural connection between fiscal multipliers and foreign holdings of public debt. Although fiscal expansions can raise domestic economic activity through various channels, they can also have crowding-out effects if the resources used to acquire public debt reduce domestic consumption and investment. These crowding-out effects are likely to be weaker when governments have access to foreign markets to place their debt, increasing the size of multipliers. We test this hypothesis on (i) post-war US data and (ii) data for a panel of 17 advanced economies from the 1980's to the present. To do so, we assemble a novel database of public debt holdings by domestic and foreign creditors for a large set of advanced economies. We combine this data with standard measures of fiscal policy shocks and show that, indeed, the size of fiscal multipliers is increasing in the share of public debt held by foreigners. In particular, the fiscal multiplier is smaller than one when the foreign share is low, such as in the U.S. in the 1950's and 1960's and Japan today, and larger than one when the foreign share is high, such as in the U.S. and Ireland today.
- JEL Code:
- E62,F32,F34,F36,F41,F62,F65,G15,H63
- 26 March 2019
-
Working Paper Series - Issue No. 2254Details
- Abstract:
- This paper uses representative individual household data from Luxembourg to evaluate how severe economic conditions could affect bank exposure to the household sector. Information on household income, expenses and liquid assets are used to calculate household-specific probabilities of default (PD), aggregate bank exposure at default (EAD) and aggregate bank loss given default (LGD). The exercise is repeated with scenarios combining severe but plausible shocks to real estate prices, bonds and stocks, household income and interest rates. Compared to the no-shock baseline, the LGD rises by a multiple of eight, reaching 4.2% of total bank exposure to the household sector. The high-stress scenario also generates a relatively high percentage of defaults among socio-economically disadvantaged households. Our main conclusion is that bank losses appear to be quite sensitive to financial stress, despite three mitigating factors in Luxembourg: indebted households tend to hold liquid assets that can help smooth shocks, household leverage tends to decline rapidly once mortgages have been serviced several years, and loan-to-value ratios at origination appear not to be excessive.
- JEL Code:
- D10,D14,E44,G01,G21
- Network:
- Household Finance and Consumption Network (HFCN)
- 26 March 2019
-
Research Bulletin - Issue No. 56Details
- Abstract:
- Should monetary policy be concerned with financial stability? Or do financial supervisory and regulatory policies suffice to achieve this goal? These questions have been prominent in the policy debate since the global financial crisis. To address them, I develop a tractable monetary model in which systemic risk and economic activity both depend on financial conditions. I show that there are benefits from using monetary policy, i.e., interest-rate policies, to enhance financial stability. These benefits are quantitatively moderate, however, and partly offset by costs in terms of inflation variability.
- JEL Code:
- E44,E52,E61
- Network:
- Research Task Force (RTF)
- 25 March 2019
-
Working Paper Series - Issue No. 2253Details
- Abstract:
- We examine the degree of market power in the big four countries of the euro area using macro and firm-micro data. We focus on three main indicators of market power in and across countries: namely, the concentration ratios, the markup and the degree of economic dynamism. For the macro database we use the sectoral data of KLEMs and for the micro data we use a combination of Orbis and iBACH (dating from 2006 onwards). We find that, in contrast to the situation in the US, market power metrics have been relatively stable over recent years and – in terms of the markup specifically – marginally trending down since the late 1990s, driven largely by Manufacturing. In terms of the debate as to the merits of market concentration, we find (relying on results for Manufacturing) that firms in sectors which exhibit high concentration, but are categorized as ‘high tech’ users, generally have higher TFP growth rates. By contrast, markups tend to display a bi-modal distribution when looked at through the lens of high concentration and high tech usage. These results would tend to confirm that the rise in market power documented for other economies is not obviously a euro area phenomenon and that welfare and policy analysis of market concentration is inevitably complex.
- JEL Code:
- D2,D4,N1,O3
- Network:
- Discussion papers
- 25 March 2019
-
Working Paper Series - Issue No. 2252Details
- Abstract:
- Does distance matter for the volatility of international real and financial transactions? We show that it does, in addition to its well-established relevance for the level of trade. A simple model of trade with endogenous markups shows that demand shocks have a larger impact on trade between more distant countries. We test this implication in two steps, relying on a broad range of real and financial transactions measures, as well as several different metrics of distance (physical, linguistic, and internet). We first show that during the Great Trade Collapse of 2007-09 international transactions fell more between countries that are more distant along the various metrics, and find that the different distance measures magnify each other’s respective impacts. We then focus on a longer panel analysis of trade in goods and show that trade is more volatile between more distant countries, with again a magnification pattern across metrics of distance.
- JEL Code:
- F10,F30
- 25 March 2019
-
Discussion Paper Series - Issue No. 8Details
- Abstract:
- We examine the degree of market power in the big four countries of the euro area using macro and firm-micro data. We focus on three main indicators of market power in and across countries: namely, the concentration ratios, the markup and the degree of economic dynamism. For the macro database we use the sectoral data of KLEMs and for the micro data we use a combination of Orbis and iBACH (dating from 2006 onwards). We find that, in contrast to the situation in the US, market power metrics have been relatively stable over recent years and – in terms of the markup specifically – marginally trending down since the late 1990s, driven largely by Manufacturing. In terms of the debate as to the merits of market concentration, we find (relying on results for Manufacturing) that firms in sectors which exhibit high concentration, but are categorized as ‘high tech’ users, generally have higher TFP growth rates. By contrast, markups tend to display a bi-modal distribution when looked at through the lens of high concentration and high tech usage. These results would tend to confirm that the rise in market power documented for other economies is not obviously a euro area phenomenon and that welfare and policy analysis of market concentration is inevitably complex.
- JEL Code:
- D2,D4,N1,O3
- 22 March 2019
- 22 March 2019
-
Governing Council decisions - Other decisions
- 22 March 2019
-
SpeechDetails
- Subtitle:
- Speech by Yves Mersch, Member of the Executive Board of the ECB, Warsaw, 22 March 2019
- 22 March 2019
-
Balance of payments (monthly)
- 21 March 2019
-
Annual Report - Statistical annexRelated
- 1 April 2019
-
Annual Report
- 21 March 2019
-
Working Paper Series - Issue No. 2251Details
- Abstract:
- This paper establishes some stylized facts of the long run relationship between growth and labor shares using historical data for the United States (1898-2010), the United Kingdom (1856-2010), and France (1896-2010). Performing individual country time-frequency analysis, we demonstrate the existence of long-term cycles in labor share of thirty to fifty years explaining a major part of the variance in the data. Further, the impact of labor share on growth changes sign with the frequency considered from negative at high frequencies to positive at low frequencies. Finally, the positive coefficient associated with the labor share at low frequencies increases over time.
- JEL Code:
- E24,E25,N1
- 21 March 2019
-
Economic Bulletin
- 21 March 2019
-
Economic Bulletin - BoxEconomic Bulletin Issue 2, 2019Details
- Abstract:
- This box describes the ECB’s monetary policy operations during the seventh and eighth reserve maintenance periods of 2018, which ran from 31 October 2018 to 18 December 2018 and from 19 December 2018 to 29 January 2019 respectively.
- JEL Code:
- E40,E52,E58
- 21 March 2019
-
Economic Bulletin - BoxEconomic Bulletin Issue 2, 2019Details
- Abstract:
- This box looks at the current phase of the business cycle in major non-euro area advanced economies with a view to assessing the factors behind the transition to weaker growth.It shows that in several key advanced economies the output gap is currently in positive territory, with activity still expanding faster than potential. Although growth in non-euro area advanced economies has been slowing, signals of a severe slowdown or recession appear contained. This notwithstanding, downside risks abound and have increased lately.
- JEL Code:
- E32,F44
- 21 March 2019
-
Economic Bulletin - BoxEconomic Bulletin Issue 2, 2019Details
- Abstract:
- On 27 February 2019, the European Commission published its annual assessment of macroeconomic imbalances and the progress made with structural reforms based on the country-specific recommendations as adopted in July 2018. According to the Commission, the number of countries experiencing imbalances has increased to 13 overall, from 11 in 2018. Despite the persistence of excessive imbalances in some Member States, the excessive imbalance procedure has never been triggered since the introduction of the macroeconomic imbalance procedure in 2012. Persistent macroeconomic imbalances – whether excessive or not – leave Member States vulnerable to adverse macroeconomic shocks and tend to increase the probability of recessions, which often carry high social and economic costs. Debt levels are still historically high in some Member States, for both government and private debt, which makes responding to a downturn or to negative shocks more difficult. To support rebalancing and avoid new imbalances in cost competitiveness across the EU, accelerating growth in unit labour costs in some countries has to be carefully monitored. Reforms remain crucial to address these imbalances, and progress on recommended reforms is assessed annually by the Commission. The Commission assessment again finds only limited progress on recommended reforms. In addition, progress with reforms has been uneven, and is particularly lacking in the areas of product markets and public finances. Further reforms to improve the investment environment are essential to stimulate well-targeted investment that improves productivity, potential growth and resilience.
- JEL Code:
- E02,E6,F02
- 21 March 2019
-
Economic Bulletin - BoxEconomic Bulletin Issue 2, 2019Details
- Abstract:
- The difference between the average interest rate that governments pay on their debt and the nominal growth rate of the economy (i-g) is a key variable for debt dynamics and sovereign sustainability analysis. Recently, i-g has turned negative in most advanced economies, including euro area sovereigns. Empirically, the relevant interest rate-growth differential for public debt dynamics above has been positive for advanced mature economies over longer periods. In particular, i-g can quickly reverse in crisis times, especially for countries with high debt burdens and/or not perceived by markets as safe havens. Overall, In the euro area, the current low interest rate-growth differentials on government debt should not be taken as an incentive for higher debt levels, especially where fiscal space is constrained.
- JEL Code:
- H68,E62,E4
- 21 March 2019
-
Economic Bulletin - BoxEconomic Bulletin Issue 2, 2019Details
- Abstract:
- Harmonised indices of consumer prices (HICPs) are regularly updated for changes in consumption weights and the items included, and on occasion also for methodological improvements. One such improvement is a change in the way the price index for package holidays is calculated in the HICP for Germany, which was implemented with the HICP release for January 2019. This has led to revisions of annual rates of change not only for Germany, but also for the euro area as a whole.
- JEL Code:
- E31
- 20 March 2019
- 20 March 2019
-
Working Paper Series - Issue No. 2250Details
- Abstract:
- We analyse the importance of macroeconomic information, such as industrial production index and oil price, for forecasting daily electricity prices in two of the main European markets, Germany and Italy. We do that by means of mixed-frequency models, introducing a Bayesian approach to reverse unrestricted MIDAS models (RU-MIDAS). We study the forecasting accuracy for different horizons (from 1 day ahead to 28 days ahead) and by considering different specifications of the models. We find gains around 20% at short horizons and around 10% at long horizons. Therefore, it turns out that the macroeconomic low frequency variables are more important for short horizons than for longer horizons. The benchmark is almost never included in the model confidence set.
- JEL Code:
- C11,C53,Q43,Q47
- 19 March 2019
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Weekly financial statementAnnexes
- 19 March 2019
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Weekly financial statement - Commentary
- 19 March 2019
-
Occasional Paper Series - Issue No. 220Details
- Abstract:
- This paper analyses the impact of lending standards for residential real estate (RRE) loans on default rates, using a novel loan-level dataset from the European DataWarehouse (EDW) that covers eight euro area countries. To the best of the authors’ knowledge, this paper is the first to use, for this purpose, a consistent set of loan-level data on loans originated in multiple euro area countries. Previous literature has used either national loan-level data, which does not allow for cross-country comparisons, or aggregate cross-country data. The dataset is first explored through an extensive descriptive analysis and this is followed by static probit regressions. The findings confirm the key influence of lending standards – in particular, loan-to-value and loan-to-income ratios at origination, original loan maturity and borrower employment status – on loan default rates. The impact of other variables, such as interest rate fixation and payment type, varies depending on the country of loan origination. These results are particularly relevant for microprudential supervisors in their ongoing assessment of banks’ credit policies. The highlighted country specificities should be taken into account in macroprudential policymaking.
- JEL Code:
- C25,G21
- 19 March 2019
-
Economic Bulletin - BoxEconomic Bulletin Issue 2, 2019Details
- Abstract:
- Harmonised consumer price indices (HICPs) for food, industrial goods, services and energy are measures the ECB uses for its more detailed analysis of inflation in the euro area. With the release of HICPs for January 2019, these analytical groups – special aggregates – have been improved. They are now calculated from a more detailed classification of products. Another recent enhancement is the extended use of price data collected in form of supermarket scanner data and via web-scraping.
- JEL Code:
- C82,E31
- 19 March 2019
-
Economic Bulletin - BoxEconomic Bulletin Issue 2, 2019Details
- Abstract:
- This box highlights the importance of the labour market to sustain economic growth since the beginning of the recovery and underlines the current labour market strength in the face of the recent slowdown in real GDP growth.
- JEL Code:
- C13,E24
- 18 March 2019
-
SpeechDetails
- Subtitle:
- Speech by Peter Praet, Member of the Executive Board of the ECB, at the EIB/Compnet conference, Kirchberg, Luxembourg, 18 March 2019
- 18 March 2019
-
SpeechDetails
- Subtitle:
- Remarks by Luis de Guindos, Vice-President of the ECB, at Asociación para el Progreso de la Dirección (APD), Madrid, 18 March 2019
- 18 March 2019
-
Working Paper Series - Issue No. 2249Details
- Abstract:
- We assess how a major, unconventional central bank intervention, Draghi’s “whatever it takes” speech, affected lending conditions. Similar to other large interventions, it responded to adverse financial and macroeconomic developments that also influenced the supply and demand for credit. We avoid such endogeneity concerns by focusing on a third country and comparing lending conditions by euro area and other banks to the same borrower. We show that the intervention reversed prior risk-taking – in volume, price, and loan credit ratings – by subsidiaries of euro area banks relative to local and other foreign banks. Our results document a new effect of large central banks’ interventions and are robust along many dimensions.
- JEL Code:
- E51,G21,F34
- Network:
- Research Task Force (RTF)
- 18 March 2019
-
Economic Bulletin - ArticleEconomic Bulletin Issue 2, 2019Details
- Abstract:
- Following the Governing Council’s decision in December 2018 to end net asset purchases under the Eurosystem’s asset purchase programme (APP), this article reviews the implementation and effects of the asset purchases. The APP has proved to be an adaptable and effective instrument to ease monetary and financial conditions, foster economic recovery, counteract disinflationary pressures and anchor inflation expectations, thereby supporting a sustained adjustment in the path of inflation towards price stability. The APP has been part of a package of policy measures together with negative interest rates on the deposit facility, forward guidance and targeted longer-term refinancing operations (TLTROs), jointly creating synergies that have enhanced the effectiveness of each of the package’s individual components. From an implementation viewpoint, the Eurosystem ensured that asset purchases were conducted smoothly and flexibly by striving for market neutrality and mitigating unintended side effects for market functioning. Whereas net asset purchases have come to an end, principal payments from maturing securities purchased under the APP will continue to be reinvested as this, together with enhanced forward guidance, provides the monetary accommodation that the Governing Council judges to be required for the continued sustained convergence of inflation to levels that are below, but close to, 2% over the medium term.
- JEL Code:
- E52,E58,E44
- 14 March 2019
- 14 March 2019
-
Press release
- 13 March 2019
-
SpeechDetails
- Subtitle:
- Speech by Benoît Cœuré, Member of the Executive Board of the ECB, at the ECB Youth Dialogue Event, Bocconi University, 13 March 2019
Annexes- 13 March 2013
-
Speech
- 13 March 2019
-
Survey of Monetary Analysts
- 12 March 2019
-
Press release
- 12 March 2019
-
Weekly financial statementAnnexes
- 12 March 2019
-
Weekly financial statement - Commentary
- 12 March 2019
-
SpeechDetails
- Subtitle:
- Panel remarks by Sabine Lautenschläger, Member of the Executive Board of the ECB, at the Financial Stability Institute 20th anniversary conference, Basel, 12 March 2019
- 12 March 2019
-
Euro area securities issues statistics
- 12 March 2019
-
InterviewDetails
- Subtitle:
- Interview on Twitter with Peter Praet, Member of the Executive Board of the ECB, conducted and published on 12 March 2019
- 11 March 2019
-
Working Paper Series - Issue No. 2248Details
- Abstract:
- This paper compares the role of monetary and fiscal policy shocks in advanced and emerging economies. Using a model with a hierarchical structure we capture the variability of GDP response to policy shocks both between and within the groups of advanced and emerging countries. Our results provide evidence that fiscal policy effects are heterogeneous across countries, with higher multipliers in advanced economies compared to emerging markets, while monetary policy is found to have more homogeneous effects on GDP. We then quantify the policy contribution on GDP growth in the last decade by means of a structural counterfactual analysis based on conditional forecasts. We find that global GDP growth benefited from substantial policy support during the global financial crisis but policy tightening thereafter, particularly fiscal consolidation, acted as a significant drag on the subsequent global recovery. In addition we show that the role of policy has differed across countries. Specifically, in advanced economies, highly accommodative monetary policy has been counteracted by strong fiscal consolidation. By contrast, in emerging economies, monetary policy has been less accommodative since the global recession.
- JEL Code:
- C32,E42,E52
- 11 March 2019
-
Euro area insurance corporations statistics
- 11 March 2019
-
InterviewDetails
- Subtitle:
- Interview of Benoît Cœuré, Member of the Executive Board of the ECB, conducted by Danilo Taino on 7 March 2019 and published on 11 March 2019
- 7 March 2019
-
Macroeconomic projections for the euro areaAnnexes
- 7 March 2019
- 7 March 2019
-
Monetary policy statementDetails
- Subtitle:
- Mario Draghi, President of the ECB,Luis de Guindos, Vice-President of the ECB,Frankfurt am Main, 7 March 2019
- 7 March 2019
-
Monetary policy decision
- 6 March 2019
- 5 March 2019
-
Weekly financial statementAnnexes
- 5 March 2019
-
Weekly financial statement - Commentary
- 5 March 2019
- 5 March 2019
-
MFI interest rate statistics
- 28 February 2019
-
Other publication
- 27 February 2019
-
Monetary developments in the euro area
- 27 February 2019
-
SpeechDetails
- Subtitle:
- Introductory remarks by Benoît Cœuré, Member of the Executive Board of the ECB, at a conference on CCP risk management organised by the Deutsche Bundesbank, the ECB and the Federal Reserve Bank of Chicago, Frankfurt am Main, 27 February 2019
- 26 February 2019
-
SpeechDetails
- Subtitle:
- Opening remarks by Benoît Cœuré, Member of the Executive Board of the ECB, at the annual dinner of the working group on euro risk-free rates, Frankfurt am Main, 26 February 2019
- 26 February 2019
-
SpeechDetails
- Subtitle:
- Speech by Yves Mersch, Member of the Executive Board of the ECB, at the 3rd annual Conference on Fintech and Digital Innovation, 26 February 2019, Brussels
- 26 February 2019
-
Weekly financial statementAnnexes
- 26 February 2019
-
Weekly financial statement - Commentary
- 25 February 2019
-
Working Paper Series - Issue No. 2247Details
- Abstract:
- We derive the Green Golden Rule (GGR) in the Habit Formation (HF) and Anticipation of Future Consumption (AFC) frameworks. Since consumption is the key variable of GGR, time non-separabilities in preferences over consumption streams, given by the AFC and HF, may have important impacts on the environment and sustainability. We demonstrate that agents who smooth their consumption patterns, according to the HF hypothesis, are more likely to preserve the environment than those who anticipate future consumption or who do not so smooth consumption.
- JEL Code:
- D90,Q56
- 22 February 2019
-
SpeechDetails
- Subtitle:
- Speech by Mario Draghi, President of the ECB, on the award of Laurea honoris causa in law from Università degli Studi di Bologna, Bologna, 22 February 2019
- 22 February 2019
- 22 February 2019
-
Governing Council decisions - Other decisions
- 22 February 2019
-
Working Paper Series - Issue No. 2246Details
- Abstract:
- We analyze the role of economic and security considerations in bilateral trade agreements. We use the pre-World War I period to test whether trade agreements are governed by pecuniary factors, such as distance and other frictions measured by gravity covariates, or by geopolitical factors. While there is support for both hypotheses, we find that defense pacts boost the probability of trade agreements by as much as 20 percentage points. Our estimates imply that were the U.S. to alienate its geopolitical allies, the likelihood and benefits of successful bilateral agreements would fall significantly. Trade creation from an agreement between the U.S. and E.U. countries would decline by about 0.6 percent of total U.S. exports.
- JEL Code:
- F13,N20
- 22 February 2019
-
Working Paper Series - Issue No. 2245Details
- Abstract:
- How do housing bubbles affect other economic sectors? We show that in the presence of collateral constraints, a bubble initially raises housing credit demand and crowds out credit to non-housing firms. If the bubble lasts, however, housing credit repayments raise banks’ net worth and expand credit supply, so that crowding-out eventually gives way to crowding-in. This is consistent with evidence from the recent Spanish housing bubble. Initially, credit growth of non-housing firms was lower at banks with higher bubble exposure, and firms relying on these banks exhibited lower credit and output growth. During the bubble’s last years, these effects reversed.
- JEL Code:
- E32,E44,G21
- 22 February 2019
-
Other publication - Issue No. 2019Details
- Subtitle:
- Analysis of high-level considerations and high-priority technical aspects
- 22 February 2019
-
Other publication
- 22 February 2019
-
Research Bulletin - Issue No. 55Details
- Abstract:
- Challenging conventional wisdom, recent research shows that, collectively, euro area banks have limited exposure to interest rate risk, but that their individual exposures vary significantly from institution to institution. Differences in interest-rate setting conventions for loan contracts, especially mortgages, across euro area countries have been shown to be an important driver of this heterogeneity. This heterogeneity remains pronounced even after taking into account hedging activity in derivatives markets, suggesting that monetary policy may be transmitted through different channels in different parts of the euro area.
- JEL Code:
- G21,E43,E44
- Network:
- Research Task Force (RTF)
- 21 February 2019
-
Monetary policy account
- 21 February 2019
- 21 February 2019
-
Annual consolidated balance sheet of the EurosystemAnnexes
- 28 June 2019
-
Annual consolidated balance sheet of the Eurosystem
- 21 February 2019
-
Press release
- 21 February 2019
-
SpeechDetails
- Subtitle:
- Speech by Peter Praet, Member of the Executive Board of the ECB, at the International Conference on Real Estate Statistics, Luxembourg, 21 February 2019
- 20 February 2019
-
SpeechDetails
- Subtitle:
- Presentation by Peter Praet, Member of the Executive Board of the ECB, at the Frankfurt Main Finance Breakfast, Frankfurt am Main, 20 February 2019
- 19 February 2019
-
Weekly financial statementAnnexes
- 19 February 2019
-
Weekly financial statement - Commentary
- 19 February 2019
-
InterviewDetails
- Subtitle:
- Interview with Luis de Guindos, Vice-President of the ECB, conducted by Marie Charrel on 13 February 2019
- 19 February 2019
-
SpeechDetails
- Subtitle:
- Address by Luis de Guindos, Vice-President of the ECB, at the European Parliamentary Week, Brussels, 19 February 2019
- 19 February 2019
-
Euro area financial vehicle corporation statistics
- 19 February 2019
-
Euro area investment fund statistics
- 19 February 2019
-
Euro money market statistics
- 19 February 2019
-
Balance of payments (monthly)
- 18 February 2019
-
InterviewDetails
- Subtitle:
- Interview with Peter Praet, Member of the Executive Board of the ECB, conducted by Detlef Fechtner and Mark Schrörs on 11 February 2019 and published on 18 February 2019
- 18 February 2019
-
Working Paper Series - Issue No. 2244Details
- Abstract:
- This paper presents empirical evidence of the role of financial conditions in China’s business cycle. We estimate a Bayesian-VAR for the Chinese economy, incorporating a financial conditions index for China that captures movements across a range of financial variables, including interest rates and interbank spreads, bond returns, and credit and equity flows. We impose sign restrictions on the impulse response functions to identify shocks to financial conditions and shocks to monetary policy. The model suggests that monetary policy, credit and financial conditions have played an important role in shaping China’s business cycle. Using conditional scenarios, we examine the role of credit in shaping economic outcomes in China over the past decade. Those scenarios underscore the important role of credit growth in supporting activity during the past decade, particularly the surge in credit following the global financial crisis in 2008. The financial tightening since the end of 2016 has contributed to a modest slowing of credit growth and activity.
- JEL Code:
- E32,E44,E51,E17
- 18 February 2019
-
Working Paper Series - Issue No. 2243Details
- Abstract:
- Do negative policy rates hinder banks’ transmission of monetary policy? To answer this question, we examine the behaviour of Italian mortgage lenders using a novel loan-level dataset. When policy rates turn negative, banks with higher ratios of retail overnight deposits to total assets charge more on new fixed rate mortgages. This suggests that the funding structure of banks may matter for the transmission of negative policy rates, especially for long-maturity illiquid assets. Nevertheless, the aggregate economic implications for households are small, suggesting that concerns about inefficient monetary policy transmission to households under modestly negative rates are likely overstated.
- JEL Code:
- E40,E52,E58,G21
- Network:
- Research Task Force (RTF)
- 15 February 2019
-
SpeechDetails
- Subtitle:
- Speech by Benoît Cœuré, Member of the Executive Board of the ECB, at the Council on Foreign Relations, New York City, 15 February 2019
- 15 February 2019
-
Working Paper Series - Issue No. 2242Details
- Abstract:
- Using a novel regulatory dataset of fully identified derivatives transactions, this paper provides the first comprehensive analysis of the structure of the euro area interest rate swap (IRS) market after the start of the mandatory clearing obligation. Our dataset contains 1.7 million bilateral IRS transactions of banks and non-banks. Our key results are as follows: 1) The euro area IRS market is highly standardised and concentrated around the group of the G16 Dealers but also around a significant group of core ”intermediaries" (and major CCPs). 2) Banks are active in all segments of the IRS euro market, whereas non-banks are often specialised. 3) When using relative net exposures as a proxy for the “flow of risk" in the IRS market, we find that risk absorption takes place in the core as well as the periphery of the network. 4) Among the Basel III capital and liquidity ratios, the leverage ratio plays a key role in determining a bank's IRS trading activity. 5) Also, after mandatory central clearing, there is still a large dispersion in IRS transaction prices, which is partly determined by bank characteristics, such as the leverage ratio.
- JEL Code:
- G21,E43,E44
- 15 February 2019
-
Working Paper Series - Issue No. 2241Details
- Abstract:
- We quantify the role of financial factors behind the sluggish post-crisis performance of European firms. We use a firm-bank-sovereign matched database to identify separate roles for firm and bank balance sheet weaknesses arising from changes in sovereign risk and aggregate demand conditions. We find that firms with higher debt levels and a higher share of short-term debt reduce their investment more after the crisis. This negative effect is stronger for firms linked to weak banks with exposures to sovereign risk, signifying increased rollover risk. These financial channels explain about 60% of the decline in aggregate corporate investment.
- JEL Code:
- E32,E44,F34,F36,G32,E22
- 14 February 2019
-
Working Paper Series - Issue No. 2240Details
- Abstract:
- This paper explores the connection between ”zombie” firms (firms that would typically exit in a competitive market) and bank health and the consequences for aggregate productivity in 11 European countries. Controlling for cyclical effects, the results show that zombie firms are more likely to be connected to weak banks, suggesting that the zombie firm problem in Europe may at least partly stem from bank forbearance. The increasing survival of zombie firms congests markets and constrains the growth of more productive firms, to the detriment of aggregate productivity growth. Our results suggest that around one-third of the impact of zombie congestion on capital misallocation can be directly attributed to bank health and additional analysis suggests that this may partly be due to reduced availability of credit to healthy firms. Finally, improvements in bank health are more likely to be associated with a reduction in the prevalence of zombie firms in countries where insolvency regimes do not unduly inhibit corporate restructuring. Thus, leveraging the important complementarities between bank strengthening efforts and insolvency regime reform would contribute to breaking the shackles on potential growth in Europe.
- JEL Code:
- D24,G21,L25,O47
- 14 February 2019
-
Occasional Paper Series - Issue No. 219Details
- Abstract:
- This paper presents a tractable, transparent and broad-based domestic cyclical systemic risk indicator (d-SRI) that captures risks stemming from domestic credit, real estate markets, asset prices, and external imbalances. The d-SRI increases on average several years before the onset of systemic financial crises, and its early warning properties for euro area countries are superior to those of the total credit-to-GDP gap. In addition, the level of the d-SRI around the start of financial crises is highly correlated with measures of subsequent crisis severity, such as GDP declines. Model estimates suggest that the d-SRI has significant predictive power for large declines in real GDP growth three to four years down the line, as it precedes shifts in the entire distribution of future real GDP growth and especially of its left tail. The d-SRI therefore provides useful information about both the probability and the likely cost of systemic financial crises many years in advance. Given its timely signals, the d-SRI is a useful analytical tool for macroprudential policymakers.
- JEL Code:
- G01,G17,C22,C54
- 13 February 2019
- 13 February 2019
- 13 February 2019
- 13 February 2019
-
Working Paper Series - Issue No. 2239Details
- Abstract:
- During the financial and sovereign debt crises, euro area interbank money markets underwent dramatic changes: the share of unsecured borrowing declined throughout the euro area, while private market haircuts on sovereign bonds and bank borrowing from the European Central Bank increased in the South. We construct a quantitative general equilibrium model to evaluate the macroeconomic impact of these developments and the associated policy response. Our model features heterogeneous banks and sovereign bonds, secured and unsecured money markets, and a central bank. We compare a benchmark policy – the central bank providing collateralized lending to banks at haircuts lower than the market - to an alternative policy that maintains a constant central bank balance sheet. We show that the fall in output, investment, and capital would have been twice as high under the alternative policy. More generally, the model allows the analysis of monetary policy tools beyond interest rate policies and quantitative easing.
- JEL Code:
- E44,E52,E58
- 13 February 2019
-
Working Paper Series - Issue No. 2238Details
- Abstract:
- Both academic researchers and policymakers posit a unique role for the US in the inter-national financial system. This paper investigates the characteristics and determinants of US cross-border financial flows and examines how these contrast with those of the rest of the world. We analyse the relative importance of US, country-specific, and global variables as determinants of aggregate and bilateral US financial flows and as determinants of country-level cross-border financial flows excluding those directly involving the US. Our results indicate that variation in US variables – notably the VIX and US dollar exchange rate – has a quantitatively important influence on global financial flows, but mostly via US cross-border flows. Global and national risk indicators perform better in explaining “rest of the world” flows. Moreover, we find that the correlation between US and rest of the world flows peaks in periods of elevated uncertainty. We interpret our findings as evidence for the existence of a global financial cycle, only some of which is driven by policies and events in the US.
- JEL Code:
- F15,F21,F36,F42,G15
- 12 February 2019
-
SpeechDetails
- Subtitle:
- Speech by Sabine Lautenschläger, Member of the Executive Board of the ECB, at the 14th Asia-Pacific High-level meeting on Banking Supervision, in Sydney, 13 February 2019
- 12 February 2019
-
Weekly financial statementAnnexes
- 12 February 2019
-
Weekly financial statement - Commentary
- 12 February 2019
-
Euro area securities issues statistics
- 11 February 2019
-
SpeechDetails
- Subtitle:
- Remarks by Luis de Guindos, Vice-President of the ECB, at Deusto Business School, Madrid, 11 February 2019
- 7 February 2019
-
InterviewDetails
- Subtitle:
- Interview with Benoît Cœuré, Member of the Executive Board of the ECB, conducted by Pierre Briançon on 5 February 2019 and published on 7 February 2019
- 7 February 2019
-
SpeechDetails
- Subtitle:
- Speech by Yves Mersch, Member of the Executive Board of the ECB, at the American European Community Association, Brussels, 7 February 2019
- 7 February 2019
-
Working Paper Series - Issue No. 2237Details
- Abstract:
- This paper contributes to the debate on the macroeconomic effectiveness of expansionary non-standard monetary policy measures in a regulated banking environment. Based on an estimated DSGE model, we explore the interactions between central bank asset purchases and bank capital-based financial policies (regulatory, supervisory or macroprudential) through its influence on bank risk-shifting motives. We find that weakly-capitalised banks display excessive risk-taking which reinforces the credit easing channel of central bank asset purchases, at the cost of higher bank default probability and risks to financial stability. In such a case, adequate bank capital demand through higher minimum capital requirements curtails the excessive credit origination and restores a more efficient propagation of central bank asset purchases. As supervisors can formulate further capital demands, uncertainty about the supervisory oversight provokes precautionary motives for banks. They build-up extra capital buffer attenuating non-standard monetary policy. Finally, in a weakly-capitalised banking system, countercyclical macroprudential policy attenuates banks risk-taking and dampens the excessive persistence of the non-standard monetary policy impulse. On the contrary, in a well-capitalised banking system, macroprudential policy should look through the effects of central bank asset purchases on bank capital position, as the costs in terms of macroeconomic stabilisation seem to outweigh the marginal financial stability benefits.
- JEL Code:
- E44,E52,F40
- Network:
- Research Task Force (RTF)
- 7 February 2019
-
Working Paper Series - Issue No. 2236Details
- Abstract:
- We examine the link between issuer reputation and mortgage-backed security (MBS) performance using a sample of 4,247 European MBS issued between 1999 and 2007. We measure performance with credit rating downgrades and delinquencies and track their changes over the long term. We find that, overall, MBS sold by reputable issuers are collateralised by higher quality asset pools which have lower delinquency rates and are less likely to be downgraded. However, as credit standards declined during the boom period of 2005-2007, asset pools securitized by reputable issuers were of worse quality compared to those securitized by less reputable issuers. Therefore, reputation as a self-disciplining mechanism failed to incentivise the production of high quality securities during the credit boom.
- JEL Code:
- G21,G24,G28
- 7 February 2019
-
Economic Bulletin
- 7 February 2019
-
Economic Bulletin - BoxEconomic Bulletin Issue 1, 2019Details
- Abstract:
- Inflation projections are based on models, assumptions and expert judgement. These include assumptions regarding the future evolution of oil prices, which mainly affect energy prices. Oil prices and oil futures have moved down significantly since autumn 2018, below the assumptions of the December 2018 Eurosystem staff projections. This box documents the mechanical implications of this shift for the projections of the energy component of HICP inflation.
- JEL Code:
- E31
- 7 February 2019
-
Survey of Professional ForecastersAnnexes
- 7 February 2019
- 7 February 2019
- 6 February 2019
-
Economic Bulletin - ArticleEconomic Bulletin Issue 1, 2019Details
- Abstract:
- The article describes the main transmission channels of the spillovers of national fiscal policies to other countries within a monetary union and investigates their magnitude using different models.
- JEL Code:
- E62,E63
- 6 February 2019
-
Economic Bulletin - BoxEconomic Bulletin Issue 1, 2019Details
- Abstract:
- Against the background of large swings in oil prices in recent months, the box assesses the key drivers of oil market developments. While demand has been relatively stable, supply factors have been the main driving force behind recent oil price volatility.
- JEL Code:
- Q02,Q41
- 5 February 2019
-
Weekly financial statementAnnexes
- 5 February 2019
-
Weekly financial statement - Commentary
- 5 February 2019
-
Economic Bulletin - ArticleEconomic Bulletin Issue 1, 2019Details
- Abstract:
- For two decades the ECB Survey of Professional Forecasters (SPF) has been collecting point forecasts and probability distributions for euro area-wide HICP inflation, real GDP growth and the unemployment rate at different horizons. This article documents the evolution of the SPF through the changing economic landscape of the past twenty years, including the Great Moderation, with relatively high economic growth and stable inflation, the financial crisis and, more recently, a prolonged period of subdued inflationary pressures. Analyses show that the strong and persistent shocks in the past ten years have created challenges for the stability of the economic relationships and mean reversion tendencies on which forecasts tend to be based. They also suggest that in 2009 there was a lasting increase in forecasters’ assessments of uncertainty across all variables and horizons. Learning from the SPF has remained a useful input for the ECB’s economic analysis and monetary policy.
- JEL Code:
- D84,E31,E37
- 4 February 2019
-
Working Paper Series - Issue No. 2235Details
- Abstract:
- This paper documents, for the first time in a systematic manner, the link between labor cost and price inflation in the euro area. Using country and sector quarterly data over the period 1985Q1-2018Q1 we find a strong link between labor cost and price inflation in the four major economies of the euro area and across the three main sectors. The dynamic interaction between prices and wages is time-varying and depends on the state of the economy and on the shocks hitting the economy. Our results show that it is more likely that labor costs are passed on to price inflation with demand shocks than with supply shocks. However, the pass-through is systematically lower in periods of low inflation as compared to periods of high inflation. These results confirm that, under circumstances of predominantly demand shocks, labor cost increases will be passed on to prices. Coming from a period of low inflation, however, this pass-through could be moderate at least until inflation stably reaches a sustained path.
- JEL Code:
- C32,E24,E31
- 4 February 2019
-
Economic Bulletin - BoxEconomic Bulletin Issue 1, 2019Details
- Abstract:
- Activity in the euro area is expected to continue to expand at a moderate pace, while more elevated uncertainty points to intensified downside risks to the growth outlook. In the context of a maturing business cycle, growth in both private consumption and business investment are expected to continue, despite a more uncertain environment. Nevertheless, the resilience of the domestic demand components, in particular investment, could be particularly challenged by increasing global uncertainty related inter alia to an escalation in trade tensions.
- JEL Code:
- E21,E22,E32
- 4 February 2019
-
SpeechDetails
- Subtitle:
- Speech by Yves Mersch, Member of the Executive Board of the ECB, at Lamfalussy Lectures Conference of Lamfalussy Award at Central Bank of Hungary, Budapest, 4 February 2019
- 1 February 2019
-
Working Paper Series - Issue No. 2234Details
- Abstract:
- We analyze the effect of bank capital requirements on the structure and risk of a financial system where markets, regulated banks, and shadow banks coexist. Banks face a moral hazard problem in screening entrepreneurs' projects, and they choose whether to be regulated or not. If regulated, a supervisor certifies their capital; if not, they have to rely on more expensive private certification. Under both risk-insensitive and risk-sensitive requirements, safer entrepreneurs borrow from the market and riskier entrepreneurs borrow from banks. But risk-insensitive (sensitive) requirements are especially costly for relatively safe (risky) entrepreneurs, which may shift from regulated to shadow banks.
- JEL Code:
- G21,G23,G28
- Network:
- ECB Lamfalussy Fellowship Programme
- 1 February 2019
-
Occasional Paper Series - Issue No. 218Details
- Abstract:
- This paper provides an overview of supply and demand factors influencing the availability of euro-denominated debt instruments that qualify as high-quality liquid assets (HQLA) in the euro area. The paper estimates the supply of HQLA issued by the public and private sectors as well as the aggregated impact of Eurosystem monetary policy operations on the amount and composition of HQLA held by banks and other economic agents. An assessment of the main demand factors is also presented. Finally, the paper provides some insights into the interaction with and implications for the Eurosystem monetary policy implementation framework in the longer run.
- JEL Code:
- D41,E58,G1,G28
- 1 February 2019
-
MFI interest rate statistics
- 1 February 2019
-
InterviewDetails
- Subtitle:
- Interview with Sabine Lautenschläger, Member of the Executive Board of the European Central Bank and Vice-Chair of the Supervisory Board of the ECB, conducted by Mariela Milkowa on 29 January 2019 and broadcast on 1 February 2019
- 31 January 2019
-
SpeechDetails
- Subtitle:
- Speech by Yves Mersch, Member of the Executive Board of the ECB, at the 2019 Annual General Meeting of the International Capital Markets Association’s European Repo and Collateral Council, Luxembourg, 31 January 2019
- 31 January 2019
-
Working Paper Series - Issue No. 2233Details
- Abstract:
- We develop a dynamic structural model of bank behaviour that provides a microeconomic foundation for bank capital and liquidity structures and analyses the effects of changes in regulatory capital and liquidity requirements as well as their interaction. Our findings suggest that adjustments in both types of requirements can have an impact on loan supply, with considerable heterogeneity across banks and over time. The model illustrates that banks' reactions depend on initial balance sheet conditions and reconciles evidence on short-term reductions in loan supply with findings suggesting that better capitalized banks are better able to lend in the medium- to long-term.
- JEL Code:
- G21,G28,G32
- Network:
- Research Task Force (RTF)
- 31 January 2019
-
Working Paper Series - Issue No. 2232Details
- Abstract:
- Focussing on repo specialness premia, using ISIN-specific transaction-by-transaction data of one-day maturity repos, we document a gradual shift from cash- to securities-driven transactions in euro area repo markets over the period 2010-2018. Compared to earlier studies focussing only on specific sub-periods or market segments we extend, illustrate, and validate evidence on financial frictions that are relevant in driving repo premia: controlling for a comprehensive range of bond-market specific characteristics, we show that repo premia have been systematically affected by fragmentation in the sovereign space, bank funding stress, and safe asset scarcity. These channels exhibit very strong country-specific differences, as also reflected by large discrepancies in country-specific interest rates on General Collateral. To ensure robustness of our empirical findings, we apply panel econometric and data mining approaches in a complementary and mutually informative way.
- JEL Code:
- E52,E44,C33,C38
- 31 January 2019
-
Press releaseAnnexes
- 31 January 2019
-
Survey on credit terms and conditions in euro-denominated securities financing and OTC derivatives markets
- 31 January 2019
-
SpeechDetails
- Subtitle:
- Keynote speech by Benoît Cœuré, Chair of the CPMI and Member of the Executive Board of the ECB, at the 14th BCBS-FSI high-level meeting for Africa on strengthening financial sector supervision and current regulatory priorities, Cape Town, 31 January 2019
- 30 January 2019
- 30 January 2019
-
Working Paper Series - Issue No. 2231Details
- Abstract:
- This paper investigates the relationship between public and private wages in the five largest euro area countries for the period 1997-2017. The analysis shows that there exists a positive and significant response of private wages to a public wage shock. This effect is found to be temporary and to differ across countries (positive and significant in France, Spain, Italy and non-significant in Germany and the Netherlands). Interestingly, the response of private wages is found to be asymmetric: a positive and statistically significant response is found in case of a positive shock to public wages, while no statistically significant effects are detected in case of a cut to public wages. As the public wage containment policies adopted during the sovereign debt crisis are expected to be gradually lifted in several euro area countries, the findings of this paper suggest that knock-on effects on private sector wages cannot be excluded in the years to come.
- JEL Code:
- E24,E62,J30,C33,C11
- 30 January 2019
-
Working Paper Series - Issue No. 2230Details
- Abstract:
- This paper provides evidence on the strategic lending decisions made by banks facing a negative funding shock. Using bank-firm level credit data, we show that banks reallocate credit within their loan portfolio in at least three different ways. First, banks reallocate to sectors where they have a high market share. Second, they also reallocate to sectors in which they are more specialized. Third, they reallocate credit towards low-risk firms. These reallocation effects are economically large. A standard deviation increase in sector market share, sector specialization or firm soundness reduces the transmission of the funding shock to credit supply by 22, 8 and 10%, respectively.
- JEL Code:
- G01,G21
- Network:
- Research Task Force (RTF)
- 29 January 2019
-
Weekly financial statementAnnexes
- 29 January 2019
-
Weekly financial statement - Commentary
- 29 January 2019
-
Working Paper Series - Issue No. 2229Details
- Abstract:
- We use a cross-country sample of monthly observations for quantitative easing (QE) treatments in order to study the causal effect of such policies on a large set of economic and financial outcome variables. We address potential endogeneity by re-randomising the sample and applying the augmented inverse probability weighting (AIPW) estimator. Our results show that QE policies do affect the central bank balance sheet and asset prices, in particular long term yields, equity prices and exchange rates in the expected direction. Most importantly, we find that QE policies lead to a sustained rise in the CPI and in inflation expectations. However, our findings suggest that the main transmission channel does not appear to be stronger aggregate demand impacting inflation through the Phillips curve, but rather exchange rate depreciation. Finally, we do not find any evidence for side effects and increases in risk taking following QE, with real house prices and real credit not increasing or falling, and no downward effect on stock market volatility.
- JEL Code:
- E5,F3
- Network:
- Research Task Force (RTF)
- 29 January 2019
-
Other publication - Issue No. 2019
- 29 January 2019
-
Euro area economic and financial developments by institutional sector (full)
- 29 January 2019
-
Research Bulletin - Issue No. 54Details
- Abstract:
- “Quantitative easing” refers to central bank purchases of assets such as stocks and bonds to increase the money supply when interest rates are too low for conventional rate cuts to provide further policy accommodation. Quantitative easing in the euro area through the ECB’s asset purchase programme (APP) has stimulated economic activity and asset prices, affecting income and wealth inequality among households. It has decreased income inequality, mostly by reducing the unemployment rate for poorer households, but also, to a lesser extent, by increasing the wages of the employed. Quantitative easing has also helped to reduce net wealth inequality slightly through its positive impact on house prices.
- JEL Code:
- D31,E52,E58
- Network:
- Research Task Force (RTF)
- 28 January 2019
-
SpeechDetails
- Subtitle:
- Introductory Statement by Mario Draghi, President of the ECB, at the ECON committee of the European Parliament, Brussels, 28 January 2019
Annexes- 28 January 2019
-
Speech
- 28 January 2019
-
Working Paper Series - Issue No. 2228Details
- Abstract:
- We provide evidence that a weak banking sector has contributed to low productivity growth following the European sovereign debt crisis. An unexpected increase in capital requirements for a subset of Portuguese banks in 2011 provides a natural experiment to study the effects of reduced bank capital adequacy on productivity. Affected banks respond not only by cutting back on lending but also by reallocating credit to firms in financial distress with prior underreported loan loss provisioning. We develop a method to detect when banks delay loss reporting using detailed loan-level data. We then show that the credit reallocation leads to a reallocation of production factors across rms. A partial equilibrium exercise suggests that the resulting increase in factor misallocation accounts for 20% of the decline in productivity in Portugal in 2012.
- JEL Code:
- G21,G38,E51,D24,O47
- Network:
- ECB Lamfalussy Fellowship Programme
- 28 January 2019
-
Working Paper Series - Issue No. 2227Details
- Abstract:
- The Eurosystem staff forecasts are conditional on the financial markets, the global economy and fiscal policy outlook, and include expert judgement. We develop a multi-country BVAR for the four largest countries of the euro area and we show that it provides accurate conditional forecasts of policy relevant variables such as, for example, consumer prices and GDP. The forecasting accuracy and the ability to mimic the path of the Eurosystem projections suggest that the model is a valid benchmark to assess the consistency of the projections with the conditional assumptions. As such, the BVAR can be used to identify possible sources of judgement, based on the gaps between the Eurosystem projections and the historical regularities captured by the model.
- JEL Code:
- C52,C53,E37
- 28 January 2019
-
Monetary developments in the euro area
- 25 January 2019
-
InterviewDetails
- Subtitle:
- Interview with Benoît Cœuré, Member of the Executive Board of the ECB, conducted by Francine Lacqua on 25 January 2019
- 25 January 2019
-
Governing Council decisions - Other decisions
- 25 January 2019
-
Working Paper Series - Issue No. 2226Details
- Abstract:
- This paper studies the relationship between the business cycle and financial intermediation in the euro area. We establish stylized facts and study their stability during the global financial crisis and the European sovereign debt crisis. Long-term interest rates have been exceptionally high and long-term loans and deposits exceptionally low since the Lehman collapse. Instead, short-term interest rates and short-term loans and deposits did not show abnormal dynamics in the course of the financial and sovereign debt crisis.
- JEL Code:
- E32,E51,E52,C32,C51
- 25 January 2019
-
Working Paper Series - Issue No. 2225Details
- Abstract:
- We address the question to what extent a central bank can de-risk its balance sheet by unconventional monetary policy operations. To this end, we propose a novel risk measurement framework to empirically study the time-variation in central bank portfolio credit risks associated with such operations. The framework accommodates a large number of bank and sovereign counterparties, joint tail dependence, skewness, and time-varying dependence parameters. In an application to selected items from the consolidated Eurosystem's weekly balance sheet between 2009 and 2015, we find that unconventional monetary policy operations generated beneficial risk spill-overs across monetary policy operations, causing overall risk to be nonlinear in exposures. Some policy operations reduced rather than increased overall risk.
- JEL Code:
- G21,C33
- 25 January 2019
-
Other publication - Issue No. 2019
- 25 January 2019
- 25 January 2019
- 25 January 2019
-
Survey of Professional ForecastersAnnexes
- 23 January 2019
- 24 January 2019
-
Monetary policy statementDetails
- Subtitle:
- Mario Draghi, President of the ECB,Luis de Guindos, Vice-President of the ECB,Frankfurt am Main, 24 January 2019
- 24 January 2019
-
Monetary policy decision
- 22 January 2019
-
Weekly financial statementAnnexes
- 22 January 2019
-
Weekly financial statement - Commentary
- 22 January 2019
-
Euro area bank lending survey - Issue No. 2018Annexes
- 22 January 2019
-
Euro area bank lending survey - Annex
Related- 22 January 2019
- 22 January 2019
- 21 January 2019
-
Press releaseRelated
- 21 January 2019
- 21 January 2019
-
Other publicationRelated
- 18 January 2019
-
Balance of payments (monthly)
- 17 January 2019
-
SpeechDetails
- Subtitle:
- Speech by Sabine Lautenschläger, Member of the Executive Board of the ECB and Vice-Chair of the Supervisory Board of the ECB, at Risk Management & Supervisory Conference organised by Banking & Payments Federation Ireland, in Dublin, Ireland, 17 January 2019
- 17 January 2019
-
InterviewDetails
- Subtitle:
- Interview with Sabine Lautenschläger, Member of the Executive Board of the ECB and Vice-Chair of the Supervisory Board of the ECB, conducted by Politico on 14 January 2019 and published on 17 January 2019
- 16 January 2019
- 16 January 2019
- 16 January 2019
-
Working Paper Series - Issue No. 2224Details
- Abstract:
- This paper presents a novel approach to investigate and model the network of euro area banks’ large exposures within the global banking system. Drawing on a unique dataset, the paper documents the degree of interconnectedness and systemic risk of the euro area banking system based on bilateral linkages. We then develop a Contagion Mapping (CoMap) methodology to study contagion potential of an exogenous default shock via counterparty credit and funding risks. We construct contagion and vulnerability indices measuring respectively the systemic importance of banks and their degree of fragility. Decomposing the results into the respective contributions of credit and funding shocks provides insights to the nature of contagion which can be used to calibrate bank-specific capital and liquidity requirements and large exposures limits. We find that tipping points shifting the euro area banking system from a less vulnerable state to a highly vulnerable state are a non-linear function of the combination of network structures and bank-specific characteristics.
- JEL Code:
- D85,G17,G33,L14
- 16 January 2019
-
Working Paper Series - Issue No. 2223Details
- Abstract:
- Should monetary policy lean against financial stability risks? This has been a subject of fierce debate over the last decades. We contribute to the debate about “leaning against the wind” (LAW) along three lines. First, we evaluate the cost and benefits of LAW using the Svensson (2017) framework for the euro area and find that the costs outweigh the benefits. Second, we extend the framework to address a critique that Svensson does not consider the lower frequency financial cycle. Third, we use this extended framework to assess the costs and benefits of monetary and macroprudential policy. We find that macroprudential policy has net marginal benefits in addressing risks to financial stability in the euro area, whereas monetary policy has net marginal costs. This would suggest that an active use of macroprudential policies targeting financial stability risks would alleviate the burden on monetary policy to “lean against the wind”.
- JEL Code:
- E58,G01
- 16 January 2019
- 16 January 2019
-
InterviewDetails
- Subtitle:
- Interview with Yves Mersch, Member of the Executive Board of the ECB, conducted by Kristina Votrubova on 11 January 2019
- 15 January 2019
-
SpeechDetails
- Subtitle:
- Speech by Mario Draghi, President of the European Central Bank, at the plenary debate of the European Parliament on the ECB’s Annual Report 2017, Strasbourg, 15 January 2019
- 15 January 2019
-
Weekly financial statementAnnexes
- 15 January 2019
-
Weekly financial statement - Commentary
- 15 January 2019
-
SpeechDetails
- Subtitle:
- Speech by Mario Draghi, President of the European Central Bank, at the session of the plenary of the European Parliament to mark the anniversary of the euro in Strasbourg, 15 January 2019
- 15 January 2019
-
Working Paper Series - Issue No. 2222Details
- Abstract:
- This paper provides new insights on the effect of inheritance receipt on retirement. We build on lifelong information on inheritances received and labor market transitions available for respondents of the French Wealth Survey. This feature allows us to compare current retirement rates among current and future inheritors. Chances of current retirement are 40% higher among current inheritors than among individuals who will inherit in the next two years, but there is substantial heterogeneity in this effect across socio-demographic groups. The effect is also stronger for individuals with a higher risk aversion, which we interpret with a simple theoretical model.
- JEL Code:
- J14,J26
- Network:
- Household Finance and Consumption Network (HFCN)
- 15 January 2019
-
Working Paper Series - Issue No. 2221Details
- Abstract:
- We show that medium-term interest rates in the euro area, Japan, UK and US are affected by domestic and foreign shocks. We find that US rates are the main source of spillovers globally and are less exposed to foreign shocks. Foreign spillovers to European rates were negligible only during the sovereign debt crisis and the introduction of more aggressive monetary policies by the ECB. We identify causal relations among asset prices through structural vector autoregressions (SVAR) and magnitude restrictions. We use preliminary regressions on event days to estimate key parameters employed to constrain the structural parameter space of the SVAR.
- JEL Code:
- C3,G2
- 11 January 2019
-
Euro area economic and financial developments by institutional sector (early)
- 11 January 2019
-
Euro money market statistics
- 11 January 2019
-
Euro area securities issues statistics
- 11 January 2019
-
SpeechDetails
- Subtitle:
- Speech by Yves Mersch, Member of the Executive Board of the ECB, at the International Conference to mark the tenth anniversary of the introduction of the euro in Slovakia, Bratislava, 11 January 2019
Annexes- 11 January 2019
-
Speech
- 10 January 2019
-
Working Paper Series - Issue No. 2220Details
- Abstract:
- We examine the implications of less powerful forward guidance for optimal policy using a sticky-price model with an effective lower bound (ELB) on nominal interest rates as well as a discounted Euler equation and Phillips curve. When the private-sector agents discount future economic conditions more in making their decisions today, an announced cut in future interest rates becomes less effective in stimulating current economic activity. While the implication of such discounting for optimal policy depends on its degree, we find that, under a wide range of plausible degrees of discounting, it is optimal for the central bank to compensate for the reduced effect of a future rate cut by keeping the policy rate at the ELB for longer.
- JEL Code:
- E52,E58,E61
- 10 January 2019
-
Monetary policy account
- 9 January 2019
-
InterviewDetails
- Subtitle:
- Interview with Luis de Guindos, Vice-President of the ECB, conducted by Toms Pastors on 7 January and broadcast on 9 January for Latvian TV1 “Pasaules Panorama (World Panorama”)
- 9 January 2019
-
Weekly financial statementAnnexes
- 9 January 2019
-
Weekly financial statement - Commentary
- 8 January 2019
-
MFI interest rate statistics
- 8 January 2019
-
Balance of payments (quarterly)
- 7 January 2019
-
SpeechDetails
- Subtitle:
- Keynote speech by Luis de Guindos, Vice-President of the ECB, at the conference “Five Years with the Euro”, Latvia, 7 January 2019
- 7 January 2019
-
InterviewDetails
- Subtitle:
- Interview with Benoît Cœuré, Member of the Executive Board of the ECB, conducted by Ali Baddou and Alexandra Bensaid and broadcast on 4 January 2019
- 3 January 2019
-
Monetary developments in the euro area
- 2 January 2019
-
Weekly financial statementAnnexes
- 2 January 2019
-
Weekly financial statement - Commentary
- 30 December 2018
-
InterviewDetails
- Subtitle:
- Interview with Sabine Lautenschläger, Member of the Executive Board of the ECB and Vice-Chair of the Supervisory Board of the ECB, conducted by Klemens Kindermann and broadcast on 30 December 2018
- 27 December 2018
-
Weekly financial statementAnnexes
- 27 December 2018
-
Weekly financial statement - Commentary
- 27 December 2018
-
Economic Bulletin
- 27 December 2018
-
Economic Bulletin - BoxEconomic Bulletin Issue 8, 2018Details
- Abstract:
- On 21 November 2018 the European Commission released its opinions on the draft budgetary plans (DBPs) of euro area governments for 2019, together with an analysis of the budgetary situation in the euro area as a whole. Each opinion includes an assessment of the compliance of the relevant plan with the Stability and Growth Pact (SGP). This exercise is important as it assesses whether countries have incorporated into their plans the country-specific recommendations for fiscal policies that were addressed to them under the 2018 European Semester, as adopted by the Economic and Financial Affairs Council on 13 July 2018. These recommendations propose, among other things, that countries with high ratios of government debt to GDP aim for a sufficiently fast reduction in indebtedness. This would raise their resilience in a future economic downturn.
- JEL Code:
- H60,H68
- 27 December 2018
-
Economic Bulletin - BoxEconomic Bulletin Issue 8, 2018Details
- Abstract:
- This box describes the ECB's monetary policy operations during the fifth and sixth reserve maintenance periods of 2018, which ran from 1 August to 18 September 2018 and from 19 September to 30 October 2018 respectively. Throughout this period the interest rates on the main refinancing operations (MROs), the marginal lending facility and the deposit facility remained unchanged at 0.00%, 0.25% and 0.40% respectively. In parallel, the Eurosystem continued to purchase public sector securities, covered bonds, asset-backed securities and corporate sector securities as part of its asset purchase programme (APP), with a target of €30 billion of purchases on average per month until the end of September and €15 billion as of October.
- JEL Code:
- E40,E52,E58
- 21 December 2018
-
Other publication - Issue No. 2018
- 21 December 2018
-
Economic Bulletin - BoxEconomic Bulletin Issue 8, 2018Details
- Abstract:
- Growth in economic activity has moderated significantly in the euro area since the end of 2017. Indeed, quarter-on-quarter GDP growth in the euro area fell to 0.2% in the third quarter of 2018, down from 0.7% in the fourth quarter of 2017. This box assesses the factors which are contributing to that slowdown and looks at whether it should be considered a surprise. In particular, it looks at whether the underlying factors are temporary or of a more permanent nature, whether they have originated within the euro area or externally, and whether the slowdown has been driven by a weakness in demand or a tightening of supply conditions.
- JEL Code:
- E20,E32
- 20 December 2018
-
Working Paper Series - Issue No. 2219Details
- Abstract:
- On 1 June 2018 the ECB celebrated its 20th anniversary. This paper provides a comprehensive view of the ECB’s monetary policy over these two decades. The first section provides a chronological account of the macroeconomic and monetary policy developments in the euro area since the adoption of the euro in 1999, going through four cyclical phases “conditioning” ECB monetary policy. We describe the monetary policy decisions from the ECB’s perspective and against the background of its evolving monetary policy strategy and framework. We also highlight a number of the key critical issues that were the subject of debate. The second section contains a partial assessment. We first analyze the achievement of the price stability mandate and developments in the ECB’s credibility. Next, we investigate the ECB’s interest rate decisions through the lens of a simple empirical interest rate reaction function. This is appropriate until the ECB hits the zero-lower bound in 2013. Finally, we present the ECB’s framework for thinking about non-standard monetary policy measures and review the evidence on their effectiveness. One of the main themes of the paper is how ECB monetary policy responded to the challenges posed by the European twin crises and the subsequent slow economic recovery, making use of its relatively wide range of instruments, defining new ones where necessary and developing the strategic underpinnings of its policy framework.
- JEL Code:
- E52,E31,E32,E42,N14,G01
- 20 December 2018
- 20 December 2018
-
Balance of payments (monthly)
- 20 December 2018
-
Economic Bulletin - BoxEconomic Bulletin Issue 8, 2018Details
- Abstract:
- The wage drift measures deviations in developments in actual wages from developments in negotiated wages. It is an important element in the macroeconomic analysis of employee compensation because it should be closely linked to cyclical developments in the labour market. In a tightening labour market, employers might be compelled to offer pay scales that are higher than those under collective agreements, to promote employees to higher bands within collectively agreed pay scales, or simply to pay bonuses on top of agreed wages as a way to reward and retain employees. Given recent protracted declines in unemployment and increasing signs of labour shortages, this box reviews the role of the wage drift in recent developments in employee compensation.
- JEL Code:
- E24,J30
- 20 December 2018
-
Economic Bulletin - BoxEconomic Bulletin Issue 8, 2018Details
- Abstract:
- In the third quarter of 2018, the total number of people in employment in the euro area was 9.6 million higher than in the second quarter of 2013 (when it fell to its lowest point during the crisis). The increase in employment in the course of the recovery has more than offset the decline observed during the crisis. As a result, euro area employment is now at its highest level ever, standing at 158.3 million. This box describes the net employment growth in the euro area over the course of the recovery and compares it with the period from the first quarter of 1999 to the first quarter of 2008 (i.e. from the introduction of the euro to the start of the crisis), which was also characterised by a continuous increase in employment at the level of the euro area as a whole.
- JEL Code:
- J21,J11
- 19 December 2018
-
Working Paper Series - Issue No. 2218Details
- Abstract:
- We assess the quantitative implications of collateral re-use on leverage, volatility, and welfare within an infinite-horizon asset-pricing model with heterogeneous agents. In our model, the ability of agents to reuse frees up collateral that can be used to back more transactions. Re-use thus contributes to the buildup of leverage and significantly increases volatility in financial markets. When introducing limits on re-use, we find that volatility is strictly decreasing as these limits become tighter, yet the impact on welfare is non-monotone. In the model, allowing for some re-use can improve welfare as it enables agents to share risk more effectively. Allowing re-use beyond intermediate levels, however, can lead to excessive leverage and lower welfare. So the analysis in this paper provides a rationale for limiting, yet not banning, re-use in financial markets.
- JEL Code:
- D53,G01,G12,G18
- 19 December 2018
-
Occasional Paper Series - Issue No. 217Details
- JEL Code:
- E52,E43
- 19 December 2018
-
Economic Bulletin - BoxEconomic Bulletin Issue 8, 2018Details
- Abstract:
- Against the background of financial market volatility in some emerging market economies (EMEs) since April, this box reviews key vulnerabilities in EMEs. Specifically, it assesses their resilience to external shocks compared to previous crisis episodes.
- JEL Code:
- F3,F4
- 18 December 2018
-
Weekly financial statementAnnexes
- 18 December 2018
-
Weekly financial statement - Commentary
- 18 December 2018
-
SpeechDetails
- Subtitle:
- Remarks by Luis de Guindos, Vice-President of the European Central Bank, at an event in honour of the 40th anniversary of the Spanish constitution organised by the Spanish Ministry of Economy in Madrid
- 18 December 2018
-
Research Bulletin - Issue No. 53Details
- Abstract:
- When a country sees its sovereign credit risk rise, do companies in that country also see their credit risk increase? We show that the answer is yes. Companies with a large public-sector ownership, as well as companies that borrow heavily from banks, are most affected. This suggests that the transmission of credit risk from sovereigns to non-financial companies occurs primarily through a fiscal and a financial channel, and points to the importance of reducing such risk spillovers and thereby overall risk in the economy, e.g. by means of the capital markets union.
- JEL Code:
- F34,F36,G15,H81,G12
- 17 December 2018
-
Working Paper Series - Issue No. 2217Details
- Abstract:
- I propose a dynamic general equilibrium model in which strategic interactions between banks and depositors may lead to endogenous bank fragility and slow recovery from crises. When banks’ investment decisions are not contractible, depositors form expectations about bank risk-taking and demand a return on deposits according to their risk. This creates strategic complementarities and possibly multiple equilibria: in response to an increase in funding costs, banks may optimally choose to pursue risky portfolios that undermine their solvency prospects. In a bad equilibrium, high funding costs hinder the accumulation of bank net worth and lead to a “gambling trap” with a persistent drop in investment and output. I bring the model to bear on the European sovereign debt crisis, in the course of which under-capitalized banks in default-risky countries experienced an increase in funding costs and raised their holdings of domestic government debt. The model is quantied using Portuguese data and accounts for macroeconomic dynamics in Portugal in 2010-2016. Policy interventions face a trade-off between alleviating banks’ funding conditions and strengthening risk-taking incentives. Liquidity provision to banks may perpetuate gambling traps when not targeted. Targeted interventions have the capacity to eliminate adverse equilibria.
- JEL Code:
- E44,F30,F34,G01,G21,G28,H63
- 17 December 2018
-
Other publication
- 17 December 2018
-
Legal conference proceedings
- 15 December 2018
-
SpeechDetails
- Subtitle:
- Speech by Mario Draghi, President of the ECB, at Laurea Honoris Causa in Economics by University of Sant'Anna, Pisa, 15 December 2018
- 14 December 2018
-
Governing Council decisions - Other decisions
- 14 December 2018
-
Other publication
- 14 December 2018
-
SpeechDetails
- Subtitle:
- Opening statement by Sabine Lautenschläger, Member of the Executive Board of the ECB and Vice-Chair of the Supervisory Board of the ECB, to panel 1 "After all the reforms: Where did we end up?" at the 6th Frankfurt Conference on Financial Market Policy: "European Financial Markets – Too Much Variety?" in Frankfurt, 14 December 2018
- 14 December 2018
-
SpeechDetails
- Subtitle:
- Speech by Luis de Guindos, Vice-President of the ECB, at the 6th Frankfurt Conference on Financial Market Policy, Frankfurt, 14 December 2018
- 13 December 2018
-
Working Paper Series - Issue No. 2216Details
- Abstract:
- In this paper we provide empirical evidence on the impact of US and UK monetary policy changes on credit supply of banks operating in Italy and France over the period 2000–2015, exploring the existence of an international bank lending channel based on the reliance on funding sources located in these two countries or denominated in their currency. We find that US monetary policy tightening leads to a reduction of lending to the domestic economy in both France and Italy, and this is mainly driven by banks that relied more intensely on USD funding markets. Conversely, we find that both French and Italian banks are isolated from UK monetary policy shocks, as most of their UK funding is denominated in Euro, despite being larger than funding from the US.
- JEL Code:
- E51,F30,F42,G20
- 13 December 2018
-
Working Paper Series - Issue No. 2215Details
- Abstract:
- This paper uses a unique comprehensive database on French security assets and liabilities to study the dynamics of domestic and external sectoral portfolios, their network structure, and their role in the propagation of shocks. We first show how the sharp deterioration of the net external portfolio position of France between 2008 and 2014 was driven by sectoral patterns such as the banking sector retrenchment and the increase in foreign liabilities of the public and corporate sectors, but was mitigated by the expansion of domestic and foreign asset portfolios of insurance companies. We also provide a network representation of the links between domestic sectors and the rest of the world, and document their evolution between 2008 and 2014. Second, we put forward and estimate a model of balance-sheet contagion through inter-sectoral security linkages. The estimation of the model shows that the financial sectors of the economy (banking, mutual fund, and insurance sector) are affected by balance-sheet contagion.
- JEL Code:
- F30,G11,G20
- 13 December 2018
- 13 December 2018
-
Macroeconomic projections for the euro areaAnnexes
- 13 December 2018
- 27 December 2018
-
Macroeconomic projections for the euro area
- 13 December 2018
-
Monetary policy statementDetails
- Subtitle:
- Mario Draghi, President of the ECB,Luis de Guindos, Vice-President of the ECB,Frankfurt am Main, 13 December 2018
- 13 December 2018
-
Monetary policy decision
- 12 December 2018
-
Euro area securities issues statistics
- 11 December 2018
-
Weekly financial statementAnnexes
- 11 December 2018
-
Weekly financial statement - Commentary
- 11 December 2018
-
Working Paper Series - Issue No. 2214Details
- Abstract:
- We assess the contribution of economic and financial factors in the determination of euro area corporate bond spreads over the period 2001-2015. The proposed multi-market, no-arbitrage affine term structure model is based on the methodology proposed by Dewachter, Iania, Lyrio, and Perea (2015). We model jointly the ‘risk-free curve’, measured by overnight index swap (OIS) rates, and the corporate yield curves for two rating classes (A and BBB). The model includes four spanned and six unspanned factors. We find that, in general, both economic (real activity and inflation) and financial factors (proxying risk aversion, flight to liquidity and general financial market stress) play a significant role in the determination of the spanned factors and hence in the dynamics of the risk-free yield curve and corporate bond spreads. Across the risk-free OIS curve, macroeconomic and financial factors are each responsible on average for explaining 30 and 65 percent of yield varation, respectively. For A- and BBB-rated corporate debt, the selected financial variables explain on average 50 percent of the variation in corporate spreads during the last decade.
- JEL Code:
- E43,E44
- 10 December 2018
-
Working Paper Series - Issue No. 2213Details
- Abstract:
- Using a pan-European dataset of 8.5 million firms, we find that firms with high debt overhang invest relatively more than otherwise similar firms if they are operating in sectors facing good global growth opportunities. At the same time, the positive impact of a marginal increase in debt on investment efficiency disappears if firm debt is already excessive, if it is dominated by short maturities, and during systemic banking crises. Our results are consistent with theories of the disciplining role of debt, as well as with models highlighting the negative link between agency problems at firms and banks and investment efficiency.
- JEL Code:
- E22,E44,G21,H63
- 7 December 2018
-
Working Paper Series - Issue No. 2212Details
- Abstract:
- Using firm-level data from a large-scale European survey among 20 countries, we analyse the determinants of firms using short-time work (STW). We show that firms are more likely to use STW in case of negative demand shocks. We show that STW schemes are more likely to be used by firms with high degrees of firm-specific human capital, high firing costs, and operating in countries with stringent employment protection legislation and a high degree of downward nominal wage rigidity. STW use is higher in countries with formalised schemes and in countries where these schemes were extended in response to the recent crisis. On the wider economic impact of STW, we show that firms using the schemes are significantly less likely to lay off permanent workers in response to a negative shock, with no impact for temporary workers. Relating our STW take-up measure in the micro data to aggregate data on employment and output trends, we show that sectors with a high STW take-up exhibit significantly less cyclical variation in employment.
- JEL Code:
- C25,E24,J63,J68
- Network:
- Wage dynamics network
- 7 December 2018
-
Working Paper Series - Issue No. 2211Details
- Abstract:
- We propose a method to decompose net lending flows into loan origination and repayments. We show that a boom in loan origination is transmitted to repayments with a very long lag, depressing the growth rate of the stock for many periods. In the euro area, repayments of the mortgage loans granted in the boom preceding the financial crisis have been dragging down net loan growth in recent years. This concealed an increasing dynamism in loan origination, especially during the last wave of ECB’s non-standard measures. Using loan origination instead of net loans has important implications for understanding macroeconomic developments. For instance, the robust developments in loan origination in recent times explain the strengthening in housing markets better than net loans. Moreover, credit supply restrictions during the crisis are estimated to be smaller. Overall, there is a premium on using loan origination and repayments in economic models, especially after large booms.
- JEL Code:
- E17,E44,G01,D14
- 7 December 2018
-
Euro area insurance corporations statistics
- 7 December 2018
-
SpeechDetails
- Subtitle:
- Introductory remarks by Benoît Cœuré, Member of the Executive Board of the ECB, at the second meeting of the Euro Cyber Resilience Board for pan-European Financial Infrastructures, Frankfurt, 7 December 2018
- 4 December 2018
-
Weekly financial statementAnnexes
- 4 December 2018
-
Weekly financial statement - Commentary
- 4 December 2018
-
MFI interest rate statistics
- 3 December 2018
-
Press releaseAnnexes
- 3 December 2018
- 3 December 2018
- 30 November 2018
-
Press release
- 30 November 2018
-
SpeechDetails
- Subtitle:
- Speech by Yves Mersch, Member of the Executive Board of the ECB, at the TIPS launch event, Frascati (Rome), 30 November 2018
- 29 November 2018
-
Financial Stability Review - Issue No. 2018
- 29 November 2018
- 29 November 2018
-
Financial Stability Review - ArticleFinancial Stability Review Issue 2, 2018Details
- Abstract:
- Over the last decade, exchange-traded funds (ETFs) have grown at a fast pace both globally and in the euro area. ETFs typically offer low-cost diversified investment opportunities for investors. ETF shares can be bought and sold at short notice, making them efficient and flexible instruments for trading and hedging purposes. At the same time, the wider use of ETFs may also come with a growing potential for transmission and amplification of risks in the financial system. This special feature focuses on two such channels arising from (i) liquidity risk in ETF primary and secondary markets and (ii) counterparty risk in ETFs using derivatives and those engaging in securities lending. While ETFs still only account for a small fraction of investment fund asset holdings, their growth has been strong, suggesting a need for close monitoring from a financial stability and regulatory perspective, including prospective interactions with other parts of the financial system.
- 29 November 2018
-
Financial Stability Review - ArticleFinancial Stability Review Issue 2, 2018Details
- Abstract:
- On aggregate, bank profitability in the euro area has improved in recent quarters along with the cyclical recovery. However, the level of earnings for many banks is still below that required by investors and bank profitability is still vulnerable to a possible turnaround in the business cycle. This special feature looks at possible avenues for banks to reach more sustainable levels of profitability in the future. It highlights the need to overcome structural challenges in the form of low cost-efficiency, limited revenue diversification and high stocks of legacy assets (in some jurisdictions).
- JEL Code:
- G21,G24,E58,E44
- 29 November 2018
-
Working Paper Series - Issue No. 2210Details
- Abstract:
- This paper uses cross-country micro-aggregated data on firm dynamics and productivity from the ECB CompNet database to provide empirical evidence on factor reallocation in the European Union (EU). The analysis finds that reallocation is towards more productive firms although the magnitude varies across countries and over time. Variation in reallocation is related to structural differences in firm size distribution across countries as well as to variation in labor and product market institutions. Productivity-enhancing reallocation generally rises in downturns but, similar to findings for the US, it did not pick up in the Great Recession. The sharp drop in exports and tightness in credit markets are seen to provide a partial explanation for this lack of a silver lining.
- JEL Code:
- E24,E32,J63,O4
- Network:
- Competitiveness Research Network
- 29 November 2018
-
Statistics Paper Series - Issue No. 30Details
- Abstract:
- Big data” is becoming an increasingly important aspect of our daily lives as the digital sources of information and intelligence that it encompasses become more structured and more publicly available. These sources may enable the generation of new datasets providing high-frequency and timely insights into unconscious digital behaviour and the consequent actions of economic agents, which may, in turn, assist in the generation of early indicators of economic and financial trends and activities. This paper examines the usefulness of Google search data in nowcasting euro area car sales, as a leading macroeconomic indicator, and considers the quality requirements for using these new data sources as a toolkit for sound decision and policy making. The paper finds that, while Google data may have predictive capabilities for nowcasting euro area car sales, further quality improvements in the data source are needed in order to move beyond experimental statistics. If these quality requirements can be met, the resulting advances in theory and knowledge around interpreting big data can be expected to significantly re-shape how we think about and explain both behaviour and complex socio-economic phenomena.
- JEL Code:
- C53,C82,E58,E71
- Network:
- N/A
- 28 November 2018
- 28 November 2018
-
SpeechDetails
- Subtitle:
- Speech by Luis de Guindos, Vice-President of the ECB, at the joint EIB-ECB conference on investment, technological transformation and skills, Luxembourg, 28 November 2018
- 28 November 2018
-
SpeechDetails
- Subtitle:
- Remarks by Benoît Cœuré, Member of the Executive Board of the ECB, at the Foreign Exchange Contact Group meeting, Frankfurt, 28 November 2018
- 28 November 2018
-
Survey on the Access to Finance of Enterprises in the euro area - Issue No. 2017Annexes
- 28 November 2018
-
SAFE questionnaire
Related- 28 November 2018
- 28 November 2018
-
Monetary developments in the euro area
- 28 November 2018
-
Press releaseRelated
- 28 November 2018
-
Survey on the Access to Finance of Enterprises in the euro area - Issue No. 2017
- 27 November 2018
-
SpeechDetails
- Subtitle:
- Speech by Yves Mersch, Member of the Executive Board of the ECB, Workshop discussion: Sustainability is becoming mainstream, Frankfurt, 27 November 2018
- 27 November 2018
-
Weekly financial statementAnnexes
- 27 November 2018
-
Weekly financial statement - Commentary
- 27 November 2018
-
Financial Stability Review - ArticleFinancial Stability Review Issue 2, 2018Details
- Abstract:
- The intensification of trade tensions this year has raised concerns about the potential adverse impact on global growth and asset prices. So far, the isolated effects of introducing tariffs on selected goods on asset prices have been adverse mainly for specific companies that rely heavily on international trade. At the same time, global financial markets have overall been fairly resilient to the announcements and implementation of tariff measures. This special feature finds that an escalation of trade tensions could trigger a global repricing in asset markets. For the euro area, asset prices would be strongly affected in the event of a full-blown global trade war, in which all countries impose tariffs on each other, while the impact of a regionally contained trade dispute escalation would be rather subdued.
- JEL Code:
- E37,F13,F18,F47
- 26 November 2018
-
SpeechDetails
- Subtitle:
- Introductory Statement by Mario Draghi, President of the ECB, at the ECON committee of the European Parliament, Brussels, 26 November 2018
Annexes- 5 December 2018
- 26 November 2018
-
SpeechDetails
- Subtitle:
- Speech by Benoît Cœuré, Member of the Executive Board of the ECB, at the Conference on European Economic Integration (CEEI), Vienna, 26 November 2018
- 26 November 2018
-
InterviewDetails
- Subtitle:
- Interview with Sabine Lautenschläger, Member of the Executive Board of the ECB and Vice-Chair of the Supervisory Board of the ECB, conducted by Agence France-Presse on 22 November 2018 and published on 26 November 2018
- 26 November 2018
-
Working Paper Series - Issue No. 2209Details
- Abstract:
- This paper finds that debt-financed fiscal multipliers vary depending on the location of the debt buyer. In a sample of 33 countries fiscal multipliers are larger when government purchases are financed by issuing debt to foreign investors (non-residents), compared to when they are financed by issuing debt to home investors (residents). In a theoretical model, the location of the government creditor produces these differential responses through the extent that private investment is crowded out. International capital mobility of the resident private sector decreases the difference between the two types of financing both in the model and in the data.
- JEL Code:
- F41,H3,E62
- Network:
- N/A
- 26 November 2018
-
SpeechDetails
- Subtitle:
- Speech by Peter Praet, Member of the Executive Board of the ECB, on “Herausforderungen für die Europäische Geldpolitik 2019” at 33. Internationales ZinsForum 2018, Frankfurt am Main, 26 November 2018
- 23 November 2018
-
Governing Council decisions - Other decisions
- 23 November 2018
-
SpeechDetails
- Subtitle:
- Remarks by Luis de Guindos, Vice-President of the ECB, on the occasion of the award of the Bernácer Prize to Benjamin Moll
- 23 November 2018
-
Working Paper Series - Issue No. 2208Details
- Abstract:
- I develop and test a model explaining the gradual price decrease observed in the days leading up to anticipated asset sales such as Treasury auctions. In the model, risk-averse investors expect an uncertain increase in the net supply of a risky asset. They face a trade-off between hedging the supply uncertainty with long positions, and speculating with short positions. As a result of hedging, the equilibrium price is above the expected price. As the supply shock approaches, uncertainty decreases due to the arrival of information, investors hedge less and speculate more, and the price decreases. In line with these predictions, meetings between the Treasury and primary dealers, as well as auction announcements, explain a 2.4 bps yield increase in Italian Treasuries.
- JEL Code:
- G11,G12,E43
- Network:
- N/A
- 23 November 2018
-
Working Paper Series - Issue No. 2207Details
- Abstract:
- This paper proposes a tractable way to incorporate lending standards ("credit qualification thresholds") into macro models of financial frictions. Banks can reject borrowers whose risk is above an endogenous threshold at which no lending rate sufficiently compensates banks for the borrowers’ default risk. Firms denied credit cut employment and labor reallocates mostly towards safer producers. Lending standards propagate bank capital shortfalls through labor misallocation causing deeper and more persistent real effects. The paper also shows that lending spreads are insufficient indicators of credit supply disruptions. That is, for the same increase in credit spreads, output falls faster when denial rates are increasing. Finally, with endogenous lending standards, first-moment bank capital shocks look like second-moment shocks.
- JEL Code:
- E32,E44,E47,G2
- Network:
- ECB Lamfalussy Fellowship Programme
- 22 November 2018
-
SpeechDetails
- Subtitle:
- Speech by Yves Mersch, Member of the Executive Board of the ECB, at the Banking and Corporate evening organised by the Hauptverwaltung in Bayern der Deutschen Bundesbank, Munich, 22 November 2018
- 22 November 2018
-
InterviewDetails
- Subtitle:
- Interview with Peter Praet, Member of the Executive Board of the ECB, conducted by Jan Mallien and Frank Wiebe on 19 November 2018 and published on 23 November 2018
- 22 November 2018
-
Monetary policy account
- 22 November 2018
-
Working Paper Series - Issue No. 2206Details
- Abstract:
- Temporal aggregation in general introduces a moving average (MA) component in the aggregated model. A similar feature emerges when not all but only a few variables are aggregated, which generates a mixed frequency model. The MA component is generally neglected, likely to preserve the possibility of OLS estimation, but the consequences have never been properly studied in the mixed frequency context. In this paper, we show, analytically, in Monte Carlo simulations and in a forecasting application on U.S. macroeconomic variables, the relevance of considering the MA component in mixed-frequency MIDAS and Unrestricted-MIDAS models (MIDAS-ARMA and UMIDAS-ARMA). Specifically, the simulation results indicate that the short-term forecasting performance of MIDAS-ARMA and UMIDAS-ARMA is better than that of, respectively, MIDAS and UMIDAS. The empirical applications on nowcasting U.S. GDP growth, investment growth and GDP deflator inflation confirm this ranking. Moreover, in both simulation and empirical results, MIDAS-ARMA is better than UMIDAS-ARMA.
- JEL Code:
- E37,C53
- Network:
- N/A
- 22 November 2018
-
Working Paper Series - Issue No. 2205Details
- Abstract:
- We estimate business cycle regime switching logit models for G7 countries to determine the effect of duration of the current business cycle phase and of foreign recessions on the likelihood that expansions and recessions come to an end. With respect to expansions in a G7 country, we find that the probability they end roughly doubles each time another G7 country falls into a recession. We also find that expansions in the US and Germany are duration dependent, i.e. are more likely to end as they grow older. This contrasts with other G7 countries where expansions are not duration dependent. With respect to recessions in a G7 country, we find that the likelihood of them coming to an end is not affected by other G7 countries’ recessions. We find duration dependence of recessions for all G7 countries, i.e. recessions that have gone on for a while are more likely to end.
- JEL Code:
- E32,C41
- Network:
- N/A
- 21 November 2018
-
Working Paper Series - Issue No. 2204Details
- Abstract:
- We estimate the long- and short-run relationship between top income and wealth shares for France and the US since 1913. We find strong evidence for a long-run cointegration relationship governed by relative saving rates at the top. For both countries, we estimate a decline in the relative saving rates at the top – after 1968 in France and 1983 in the US, equivalent to a reduction of the long-run gap between wealth and income inequality compared to the period before. In the short-run, income inequality drives wealth inequality, while the converse link is weaker and slower. Using counterfactual simulations, we find that the recent rise in wealth inequality in the US is largely attributable to the contemporary increase in income inequality. Modest income concentration dynamics and a stronger decline in relative saving rates at the top than in the US contributed to a more subdued rise in wealth inequality in France.
- JEL Code:
- D31,E21,E25,N32,N34
- Network:
- Household Finance and Consumption Network (HFCN)
- 21 November 2018
-
Working Paper Series - Issue No. 2203Details
- Abstract:
- Sub-national governments often finance substantial parts of their budgets via taxes on capital or other mobile factors – despite having access to alternative, less distortionary, revenue sources. This paper develops three hypotheses to explain this pattern and tests them in a natural experiment from Germany. The first hypothesis is that fiscal redistribution between jurisdictions lowers the perceived excess burden of distortionary taxation and thereby raises its attractiveness from the perspective of local governments; the second is that a desire for redistribution within jurisdictions induces a shift away from less distortionary tax instruments, despite their superior efficiency properties; the third is that distortionary taxation serves as a Pigouvian intervention to correct externalities. The empirical analysis supports redistribution between jurisdictions as important, but insufficient, to fully explain the observed reliance on distortionary taxation. Among the remaining two hypotheses, the data favour Pigouvian over distributional motives as a further rationale for the local taxation of mobile factors.
- JEL Code:
- H23,H25,H71,H77
- Network:
- N/A
- 20 November 2018
-
Weekly financial statementAnnexes
- 20 November 2018
-
Weekly financial statement - Commentary
- 20 November 2018
-
Working Paper Series - Issue No. 2202Details
- Abstract:
- Do borrowers demand less credit from banks with weak balance sheet positions? To answer this question we use novel bank-specific survey data matched with confidential balance sheet information on a large set of euro area banks. We find that, following a conventional monetary policy shock, bank balance sheet strength influences not only credit supply but also credit demand. The resilience of lenders plays an important role for firms when selecting whom to borrow from. We also assess the impact on credit origination of unconventional monetary policies using survey responses on the exposure of individual banks to quantitative easing and negative interest rate policies. We find that both policies do stimulate loan supply even after fully controlling for bank-specific demand, borrower quality, and balance sheet strength.
- JEL Code:
- E51,G21
- Network:
- Research Task Force (RTF)
- 20 November 2018
-
Working Paper Series - Issue No. 2201Details
- Abstract:
- This survey discusses behavioral and experimental macroeconomics emphasizing a complex systems perspective. The economy consists of boundedly rational heterogeneous agents who do not fully understand their complex environment and use simple decision heuristics. Central to our survey is the question under which conditions a complex macro-system of interacting agents may or may not coordinate on the rational equilibrium outcome. A general finding is that under positive expectations feedback (strategic complementarity) – where optimistic (pessimistic) expectations can cause a boom (bust) – coordination failures are quite common. The economy is then rather unstable and persistent aggregate fluctuations arise strongly amplified by coordination on trend-following behavior leading to (almost-)self-fulfilling equilibria. Heterogeneous expectations and heuristics switching models match this observed micro and macro behaviour surprisingly well. We also discuss policy implications of this coordination failure on the perfectly rational aggregate outcome and how policy can help to manage the self-organization process of a complex economic system.
- JEL Code:
- D84,D83,E32,C92
- Network:
- N/A
- 20 November 2018
-
Euro money market statistics
- 19 November 2018
-
Working Paper Series - Issue No. 2200Details
- Abstract:
- This paper provides a detailed description of an extended version of the ECB’s New Area-Wide Model (NAWM) of the euro area (cf. Christoffel, Coenen, and Warne 2008). The extended model—called NAWM II—incorporates a rich financial sector with the threefold aim of (i) accounting for a genuine role of financial frictions in the propagation of economic shocks and policies and for the presence of shocks originating in the financial sector itself, (ii) capturing the prominent role of bank lending rates and the gradual interest-rate pass-through in the transmission of monetary policy in the euro area, and (iii) providing a structural framework useable for assessing the macroeconomic impact of the ECB’s large-scale asset purchases conducted in recent years. In addition, NAWM II includes a number of other extensions of the original model reflecting its practical uses in the policy process over the past ten years.
- JEL Code:
- C11,C52,E30,E37,E58
- 19 November 2018
-
Statistics Paper Series - Issue No. 29Details
- Abstract:
- This statistical paper describes and explains a specific tool enabling statisticians to gain additional insights and assess the consistency of government finance statistics (GFS): analysis of the deficit-debt adjustment (DDA), or stock-flow adjustment (SFA). The DDA reconciles two key government indicators – the government deficit/surplus and government debt. DDA analysis helps to establish whether these statistics are plausible and reliable by exploring the consistency between governments’ non-financial accounts (measuring the government deficit/surplus) and financial accounts (measuring government debt at market value). It also takes into account valuation differences between the financial accounts and government debt measured at face value (Maastricht debt). Recent years’ GFS for the euro area aggregate and the individual euro area countries (and, where useful, other EU Member States’ data) are used to illustrate DDA analysis. The dataset bridging the government deficit and the change in government debt reveals many aspects of a government’s economic policies. For instance, the components of the DDA shed light on its equity investments or privatisations, its use of investment in financial reserves, some aspects of its debt management and the accumulation of fiscal or social arrears.
- JEL Code:
- H62,H63
- Network:
- N/A
- 19 November 2018
-
Balance of payments (monthly)
- 19 November 2018
-
Euro area investment fund statistics
- 19 November 2018
-
Euro area financial vehicle corporation statistics
- 16 November 2018
- 16 November 2018
- 16 November 2018
- 16 November 2018
- 16 November 2018
- 16 November 2018
- 16 November 2018
- 16 November 2018
-
SpeechDetails
- Subtitle:
- Speech by Mario Draghi, President of the ECB, Frankfurt European Banking Congress, Frankfurt am Main, 16 November 2018
- 15 November 2018
-
SpeechDetails
- Subtitle:
- Keynote speech by Luis de Guindos, Vice-President of the ECB, at the Annual General Meeting of the Foreign Bankers’ Association, Amsterdam, 15 November 2018
- 15 November 2018
-
SpeechDetails
- Subtitle:
- Welcome remarks by Benoît Cœuré, Chair of the Committee on Payments and Market Infrastructures of the Bank for International Settlements and Member of the Executive Board of the ECB, at the Economics of Payments IX conference, Basel, 15 November 2018
Annexes- 15 November 2018
- 15 November 2018
-
Working Paper Series - Issue No. 2199Details
- Abstract:
- This paper examines the effects of monetary policy on the equity values of European banks. We identify monetary policy shocks by looking at changes in the EONIA one-month and two-year swap contract rates during narrow windows around the press statements and press conferences announcing monetary policy actions taken by the ECB. We find that an unexpected decrease of 25 basis points on the short-term policy rate increases banks’ stock prices by about 1% on average. These effects vary substantially over time; in particular, they were stronger during the crisis period and reversed during the recent period with low and even negative interest rates. That is, with rates close to or below zero, further interest rate cuts became detrimental for banks’ equity values. The composition of banks’ balance sheets is important in order to understand these effects. In particular, the change in sensitivity to interest rate surprises as rates drop to low and negative levels is much more pronounced for banks with a high reliance on deposit funding, compared to other banks. We argue that this pattern can be explained by a reluctance of banks to pay negative interest rates on retail deposits.
- JEL Code:
- E52,E58,G21
- Network:
- Research Task Force (RTF)
- 15 November 2018
-
Working Paper Series - Issue No. 2198Details
- Abstract:
- In the policy debate on the effectiveness of the Global Financial Safety Net, concerns have been raised that expectations of adverse effects of IMF programmes may deter countries from asking for an IMF programme when they need one, a form of ‘IMF stigma’. We explore the existence of IMF financial market stigma using monthly data by estimating how and to which extent adverse market reactions to a programme materialise and how past experience with adverse market reactions affects subsequent IMF programme participation. Our results, derived with event history techniques and propensity score matching, indicate no role for ‘IMF stigma’ stemming from the fear of adverse market movements. Instead, we find evidence of ‘IMF recidivism’ driven by adverse selection and IMF conditionality.
- JEL Code:
- E02,F32,F33,F34
- Network:
- N/A
- 14 November 2018
- 14 November 2018
-
Working Paper Series - Issue No. 2197Details
- Abstract:
- We estimate the effects of quantitative easing (QE) measures by the ECB and the Federal Reserve on the US dollar-euro exchange rate at frequencies and horizons relevant for policymakers. To do so, we derive a theoretically-consistent local projection regression equation from the standard asset pricing formulation of exchange rate determination. We then proxy unobserved QE shocks by future changes in the relative size of central banks’ balance sheets, which we instrument with QE announcements in two-stage least squares regressions in order to account for their endogeneity. We find that QE measures have large and persistent effects on the exchange rate. For example, our estimates imply that the ECB’s APP program which raised the ECB’s balance sheet relative to that of the Federal Reserve by 35 percentage points between September 2014 and the end of 2016 depreciated the euro vis-à-vis the US dollar by a 12%. Regarding transmission channels, we find that a relative QE shock that expands the ECB’s balance sheet relative to that of the Federal Reserve depreciates the US dollar-euro exchange rate by reducing euro-dollar short-term money market rate differentials, by widening the cross-currency basis and by eliciting adjustments in currency risk premia. Changes in the expectations about the future monetary policy stance, reflecting the “signalling” channel of QE, also contribute to the exchange rate response to QE shocks.
- JEL Code:
- E5,F3
- Network:
- Research Task Force (RTF)
- 14 November 2018
-
Working Paper Series - Issue No. 2196Details
- Abstract:
- This paper exploits a very large multi-country survey of consumers to investigate empirically the relationship between inflation expectations and consumer spending. We document that for the Euro Area and almost all of its constituent countries this relationship is generally positive: a higher expected change in inflation is associated with an increase in the probability that a given consumer will make major purchases. Moreover, in line with the predictions of macroeconomic theory, the impact is stronger when the lower bound on nominal interest rates is binding. Also, using the estimated spending probabilities from our micro-level analysis, we indirectly estimate the impact of a gradual increase in inflation expectations on aggregate private consumption. We find the effects to be economically relevant, especially when the lower bound is binding.
- JEL Code:
- E21,E31,E52,D12,D84
- Network:
- N/A
- 14 November 2018
-
Research Bulletin - Issue No. 52Details
- Abstract:
- How beneficial is labour market flexibility ¬– for instance, the ability to hire and fire workers – for firm growth? And how does such flexibility interact with a firm’s ability to obtain bank credit? This article provides evidence that less rigid employment protection benefits firms during times of scarce credit. We study the performance of credit constrained Spanish firms during the financial crisis of 2008-09, exploiting a firm-size-specific labour regulation that imposes more stringent employment protection on firms with more than 50 employees. We find that Spanish firms with fewer than 50 employees operating in sectors in which labour and capital are close substitutes grew faster during the financial crisis when exposed to a negative credit shock than similarly credit constrained but larger firms. This effect is more pronounced for firms that were more productive before the crisis, suggesting that flexible employment protection laws benefit otherwise healthy firms that are credit constrained, by enabling them to substitute labour for capital and continue growing.
- JEL Code:
- G21,J80,D20
- Network:
- N/A
- 13 November 2018
-
SpeechDetails
- Subtitle:
- Speech by Luis de Guindos, Vice-President of the ECB, at the Deutsche Bundesbank reception on the occasion of Euro Finance Week, Frankfurt, 13 November 2018
- 13 November 2018
-
Weekly financial statementAnnexes
- 13 November 2018
-
Weekly financial statement - Commentary
- 13 November 2018
-
Working Paper Series - Issue No. 2195Details
- Abstract:
- This paper studies the interaction of government debt and financial markets. This interaction, termed a ‘diabolic loop’, is driven by government choice to bail out banks and the resulting incentives for banks to hold government debt rather than self-insure through equity buffers. We highlight the role of bank equity issuance in determining whether the ‘diabolic loop’ is a Nash Equilibrium of the interaction between banks and the government. When equity is issued, no diabolic loop exists. In equilibrium, banks’ rational expectations of a bailout ensure that no equity is issued and the sovereign-bank loop is operative.
- JEL Code:
- G01,G28,E44
- Network:
- N/A
- 13 November 2018
-
Working Paper Series - Issue No. 2194Details
- Abstract:
- This paper proposes a semi-structural approach to identifying excessive household credit developments. Using an overlapping generations model, a normative trend level for the real household credit stock is derived that depends on four fundamental economic factors: real potential GDP, the equilibrium real interest rate, the population share of the middle-aged cohort, and institutional quality. Semi-structural household credit gaps are obtained as deviations of the real household credit stock from this fundamental trend level. Estimates of these credit gaps for 12 EU countries over the past 35 years yield long credit cycles that last between 15 and 25 years with amplitudes of around 20%. The early warning properties for financial crises are superior compared to credit gaps that are obtained from purely statistical filters. The proposed semistructural household credit gaps could therefore provide useful information for the formulation of countercyclical macroprudential policy, especially because they allow for economic interpretation of observed credit developments.
- JEL Code:
- E32,E51,E21,G01,D15
- Network:
- N/A
- 13 November 2018
-
Euro area securities issues statistics
- 13 November 2018
-
SpeechDetails
- Subtitle:
- Opening Statement by Sabine Lautenschläger, Member of the Executive Board of the ECB and Vice-Chair of the Supervisory Board of the ECB, at the Banking Supervision, Resolution and Risk Management conference during the 21st Euro Finance Week, Frankfurt am Main, 13 November 2018
- 13 November 2018
-
SpeechDetails
- Subtitle:
- Speech by Peter Praet, Member of the Executive Board of the ECB, at the UBS Conference, London, 13 November 2018
- 12 November 2018
-
SpeechDetails
- Subtitle:
- Speech by Luis de Guindos, Vice-President of the ECB, at the Opening Conference, 21st Euro Finance Week, Frankfurt am Main, 12 November 2018
- 8 November 2018
-
SpeechDetails
- Subtitle:
- Introductory statement by Mario Draghi, President of the ECB, during his exchange of views with the House of Representatives in Dublin, Ireland, 8 November 2018
- 8 November 2018
-
SpeechDetails
- Subtitle:
- Speech by Benoît Cœuré, Member of the Executive Board of the ECB, at a conference on “Scaling up Green Finance: The Role of Central Banks”, organised by the Network for Greening the Financial System, the Deutsche Bundesbank and the Council on Economic Policies, Berlin, 8 November 2018
- 8 November 2018
-
Economic Bulletin
- 8 November 2018
-
Economic Bulletin - BoxEconomic Bulletin Issue 7, 2018Details
- Abstract:
- The composition of the euro area current account balance in terms of its geographical counterparts has been fairly stable in recent years, with the euro area's most important trading partners accounting for the largest part of the bilateral surpluses and deficits. The bulk of the increase in the euro area's current account surplus since 2013 was accounted for by improvements vis-à-vis the euro area's three largest trading partners. The largest changes in the geographical breakdown of the euro area current account balances were recorded for trade in goods and primary income.
- JEL Code:
- F32,F41
- 8 November 2018
-
Economic Bulletin - BoxEconomic Bulletin Issue 7, 2018Details
- Abstract:
- This box analyses the impact of the Eurosystem's asset purchase programme (APP) on the growing market for 'green bonds'. It describes the composition of the Eurosystem's green bond holdings and assesses developments in prices and outstanding volumes of green bonds, before discussing the extent to which these may have been affected by the APP.
- JEL Code:
- G11,G12,Q59,E59
- 8 November 2018
-
Economic Bulletin - BoxEconomic Bulletin Issue 7, 2018Details
- Abstract:
- Euro area headline inflation is currently dominated by a strong contribution from energy prices. In the third quarter of 2018, energy prices contributed 0.9 percentage point to the headline HICP inflation rate of around 2.0%, thus accounting for almost half. This large contribution mainly reflects past developments in crude oil prices, a factor that constitutes a common influence across euro area countries. However, the contribution of energy to HICP inflation depends both on the share of energy in consumption expenditure and on the degree of pass-through of oil price developments to consumer energy prices. This box reviews the extent to which these features can help explain differences across euro area countries in the recent contribution of energy to overall HICP inflation.
- JEL Code:
- E31,Q41,Q47
- 8 November 2018
-
Economic Bulletin - BoxEconomic Bulletin Issue 7, 2018Details
- Abstract:
- This box reviews the characteristics of intangible assets and looks at a number of implications of their increasing importance. It finds that investment in intangible assets has increased in importance in the euro area, both in absolute terms and relative to tangible assets. Investment in intangibles enables productivity gains and can explain part of the gap between firms' investment in tangible assets and Tobin's Q. At the same time, the specific nature of intangible assets poses challenges as regards the measurement of activity, profits and capital stock, as well as making it less easy to use those assets as collateral.
- JEL Code:
- D25,E22
- 7 November 2018
-
Press release
- 7 November 2018
-
Economic Bulletin - BoxEconomic Bulletin Issue 7, 2018Details
- Abstract:
- This box summarises the findings of an ad hoc ECB survey of leading euro area companies looking at the impact that digitalisation has on the economy. Overall, companies regard digitalisation as having a positive impact on their sales and productivity, mainly because it provides better access to customers, facilitates the sharing of knowledge and makes production processes more efficient. They also see digitalisation increasing their flexibility when it comes to price setting. Most companies, particularly manufacturers, tend to regard digitalisation as reducing costs and increasing margins, but retailers are more likely to see input costs increasing and margins being squeezed. Finally, companies report that digitalisation is having a small negative impact on employment, while emphasising the importance of retraining and upskilling.
- JEL Code:
- O33,E00
- 6 November 2018
-
Weekly financial statementAnnexes
- 6 November 2018
-
Weekly financial statement - Commentary
- 6 November 2018
-
SpeechDetails
- Subtitle:
- Speech by Sabine Lautenschläger, Member of the Executive Board of the ECB and Vice-Chair of the Supervisory Board of the ECB, Luncheon of Chairs of Supervisory Boards of banks in Germany, Frankfurt, 6 November 2018
- 6 November 2018
-
Working Paper Series - Issue No. 2193Details
- Abstract:
- We study spillovers from bank to sovereign risk in the euro area using difference specifications around the European Central Bank’s release of stress test results for 130 significant banks on October 26, 2014. We document that following this information release bank equity prices in stressed countries declined. Surprisingly, bank risk in stressed countries was not absorbed by their sovereigns but spilled over to non-stressed euro area sovereigns. As a result, in non-stressed countries, the co-movement between sovereign and bank risk increased. This suggests that market participants perceived that bank risk is shared within the euro area.
- JEL Code:
- C68,F34
- Network:
- N/A
- 6 November 2018
-
Economic Bulletin - ArticleEconomic Bulletin Issue 7, 2018Details
- Abstract:
- The housing market has important macroeconomic and macroprudential implications for the euro area economy. In view of the duration of the ongoing upturn in euro area house prices and residential investment, which started at the end of 2013, analysing the state of the housing market is particularly informative. This article discusses the ongoing housing market upturn, from a chronological and fundamental perspective. It also explores a selected set of indicators that can potentially inform on the state of the housing market, elaborating on the demand and supply factors underpinning the current upturn, as well as their relative importance.
- JEL Code:
- E22,E31,E32,R31
- 5 November 2018
-
Other publicationDetails
- Network:
- N/A
- 5 November 2018
-
SpeechDetails
- Subtitle:
- Speech by Luis de Guindos, Vice-President of the ECB, at the joint National Bank of Belgium/ Toulouse School of Economics / Solvay Brussels School of Economics and Management / European Central Bank colloquium, Brussels, 5 November 2018
- 5 November 2018
-
Economic Bulletin - ArticleEconomic Bulletin Issue 7, 2018Details
- Abstract:
- Potential output is typically seen by economic analysts as the highest level of economic activity that can be sustained over the long term. Changes in potential output can be driven by factors such as labour supply, capital investment and technological innovation. Recent estimates by international institutions suggest that the euro area economy is currently operating close to its potential. The ongoing economic expansion appears to have largely absorbed the spare capacity created by the global financial crisis and the sovereign debt crisis. At the same time, the estimated rate of potential output growth also appears to have recovered most of its pre-crisis momentum, underpinned mainly by an expansion of the labour force, a decline in trend unemployment and stronger productivity gains. Looking ahead, projections by international institutions suggest that actual euro area GDP growth will continue to outpace potential growth in the near term. Hence, supply constraints are likely to become increasingly binding going forward, which would be conducive to a gradual strengthening of euro area inflation.
- JEL Code:
- E22,E23,E32
- 2 November 2018
-
InterviewDetails
- Subtitle:
- Interview with Peter Praet, Member of the Executive Board of the ECB, conducted by Isabel Arriaga e Cunha on 18 June 2018 and published on 2 November 2018
- 31 October 2018
-
Working Paper Series - Issue No. 2192Details
- Abstract:
- The zero lower bound (ZLB) constraint on interest rates makes speed limit policies (SLPs) — policies aimed at stabilizing output growth — less effective. Away from the ZLB, the history dependence induced by a concern for output growth stabilization improves the inflation-output tradeoff for a discretionary central bank. However, in the aftermath of a deep recession with a binding ZLB, a central bank with an objective for output growth stabilization aims to engineer a more gradual increase in output than under the standard discretionary policy. The anticipation of a more restrained recovery exacerbates the declines in inflation and output when the lower bound is binding.
- JEL Code:
- E52,E61
- Network:
- N/A
- 31 October 2018
-
Occasional Paper Series - Issue No. 216Details
- Abstract:
- A macroeconomic stabilisation function for the euro area - as envisaged in the Five Presidents’ Report - plays a central role in the debate on deepening Economic and Monetary Union (EMU). We evaluate a broad range of options, their impact on economic growth, macroeconomic stabilisation and synchronisation of the euro area business cycle, and review how they could be designed so they do not undermine incentives for welfare-enhancing national economic policies. A common macroeconomic stabilisation function, e.g. in the form of a European Unemployment Insurance (EUI), could in theory help stabilise the business cycle in the euro area, especially in some participating Member States. Yet, simulating the effects of such a function for 2002-2014 suggests that its stabilisation properties would have been relatively limited. At the same time, design options with meaningful safeguards and relatively low financing requirements would have been most efficient when comparing the degree of stabilisation with the size of the funds distributed among countries. Finally, we discuss some design elements of a scheme whose aim is to support the transition process towards more resilient economic structures in the euro area as envisaged in the Five Presidents’ Report.
- JEL Code:
- J65,H53,F55
- Network:
- N/A
- 31 October 2018
-
MFI interest rate statistics
- 30 October 2018
-
SpeechDetails
- Subtitle:
- Speech by Sabine Lautenschläger, Member of the Executive Board of the ECB and Vice-Chair of the Supervisory Board of the ECB, at the 13th ASBA-BCBS-FSI High-Level Meeting on Global and Regional Supervisory Priorities in Nassau, Bahamas, 30 October 2018
- 30 October 2018
-
Weekly financial statementAnnexes
- 30 October 2018
-
Weekly financial statement - Commentary
- 30 October 2018
-
Working Paper Series - Issue No. 2191Details
- Abstract:
- Protection buyers use derivatives to share risk with protection sellers, whose assets are only imperfectly pledgeable because of moral hazard. To mitigate moral hazard, privately optimal derivative contracts involve variation margins. When margins are called, protection sellers must liquidate some of their own assets. We analyse, in a general-equilibrium framework, whether this leads to inefficient fire sales. If investors buying in a fire sale interim can also trade ex ante with protection buyers, equilibrium is information-constrained efficient even though not all marginal rates of substitution are equalized. Otherwise, privately optimal margin calls are inefficiently high. To address this inefficiency, public policy should facilitate ex-ante contracting among all relevant counterparties.
- JEL Code:
- G18,D62,G13,D82
- Network:
- N/A
- 30 October 2018
-
Working Paper Series - Issue No. 2190Details
- Abstract:
- This paper studies the effects of quantitative easing on income and wealth of individual euro area households. The aggregate effects of quantitative easing are estimated in a multi-country VAR model of the four largest euro area countries, in which key variables affecting household income and wealth are included, such as the unemployment rate, wages, interest rates, house prices and stock prices. The aggregate effects are distributed across the individual households by means of a reduced-form simulation on micro data from the Household Finance and Consumption Survey, capturing the income composition, the portfolio composition and the earnings heterogeneity channels of transmission. We find that the earnings heterogeneity channel plays a key role: quantitative easing compresses the income distribution since many households with lower incomes become employed. In contrast, monetary policy has only negligible effects on wealth inequality.
- JEL Code:
- D14,D31,E44,E52,E58
- Network:
- Household Finance and Consumption Network (HFCN)
- 29 October 2018
-
Forum on Central Banking - Conference proceedings - Issue No. 2018
- 29 October 2018
-
Working Paper Series - Issue No. 2189Details
- Abstract:
- This paper presents new evidence on the importance of insolvency frameworks for private sector debt deleveraging and for the resolution of non-performing loans (NPL). We construct an aggregate insolvency framework index (IFI), which is used as explanatory variable in the empirical analysis. By means of panel estimates over 2003-2016, we show that OECD countries with better IFI deleverage faster and adjust their NPL levels more rapidly than countries with worse IFI. We also show that there is a strong correlation between the level of NPL and IFI, which appears to be state-dependent, i.e. in a situation of high unemployment relative to its historical average the NPL ratio is generally lower for a higher IFI. Finally, our results indicate that better insolvency frameworks lead to faster NPL reductions and to lower NPL increases during economic bad times.
- JEL Code:
- C23,E02,E05,O52
- Network:
- N/A
- 29 October 2018
-
Occasional Paper Series - Issue No. 215Details
- Abstract:
- The article analyses recent developments in business investment for a large group of EU countries, using a broad set of analytical tools and data sources. We find that the assessment of whether or not investment is currently low varies across benchmarks and countries. At the euro area level and for most countries, the level of business investment is broadly in line with the level of overall activity. However rates of capital stock growth have slowed down since the crisis. The main cyclical determinants of investment developments in the euro area include foreign and domestic demand, uncertainty and financial conditions. Uncertainty seems to have played a negative role during the financial and sovereign debt crises; however, given its low levels more recently, it has not acted as a drag on business investment overall during the recovery. Credit constraints appear to have hindered investment during the twin crises, especially in stressed countries. Aside from cyclical developments, important secular factors – relating to demographics, the changing nature and location of production, and the business environment – have influenced investment. Another factor that may have amplified the decline in private investment, particularly in countries that were hit hardest by the sovereign debt crisis, is the low level of public investment. This is because when public investment enhances the productivity of the private sector, there may be positive spillovers from the former to the latter, including across countries. Finally, intra-sector capital misallocation, measured as the within-sector dispersion across firms in the marginal revenue product of capital, has been increasing in Europe since 2002, which may in turn have exerted a significant drag on total factor productivity dynamics, and hence on aggregate output growth.
- JEL Code:
- E32,E52,E62,D24,D61
- Network:
- N/A
- 29 October 2018
- 26 October 2018
-
SpeechDetails
- Subtitle:
- Speech by Benoît Cœuré, Member of the Executive Board of the ECB, at a conference on “Exiting Unconventional Monetary Policies”, organised by the Euro 50 Group, the CF40 forum and CIGI, Paris, 26 October 2018
Annexes- 26 October 2018
- 26 October 2018
-
SpeechDetails
- Subtitle:
- First Lamfalussy Lecture by Mario Draghi, President of the ECB, at the Banque Nationale de Belgique, Brussels, 26 October 2018
- 26 October 2018
-
Governing Council decisions - Other decisions
- 26 October 2018
- 26 October 2018
-
Working Paper Series - Issue No. 2188Details
- Abstract:
- A statistical decision rule incorporating judgment does not perform worse than a judgmental decision with a given probability. Under model misspecification, this probability is unknown. The best model is the least misspecified, as it is the one whose probability of underperforming the judgmental decision is closest to the chosen probability. It is identified by the statistical decision rule incorporating judgment with lowest in sample loss. Averaging decision rules according to their asymptotic performance results in decisions which are weakly better than the best decision rule. The model selection criterion is applied to a vector autoregression model for euro area inflation.
- JEL Code:
- C1,C11,C12,C13
- Network:
- N/A
- 26 October 2018
-
Euro area economic and financial developments by institutional sector (full)
- 26 October 2018
- 26 October 2018
-
Survey of Professional ForecastersAnnexes
- 25 October 2018
- 25 October 2018
-
Monetary policy statementDetails
- Subtitle:
- Mario Draghi, President of the ECB,Luis de Guindos, Vice-President of the ECB,Frankfurt am Main, 25 October 2018
- 25 October 2018
-
Monetary policy decision
- 24 October 2018
-
Monetary developments in the euro area
- 23 October 2018
-
Weekly financial statementAnnexes
- 23 October 2018
-
Weekly financial statement - Commentary
- 23 October 2018
- 22 October 2018
-
Euro area bank lending survey - Issue No. 2018Annexes
- 21 October 2018
-
Euro area bank lending survey - Annex
Related- 23 October 2018
- 19 October 2018
-
Balance of payments (monthly)
- 17 October 2018
-
T2S Harmonisation progress report - Issue No. 9Annexes
- 17 October 2018
- 17 October 2018
-
SpeechDetails
- Subtitle:
- Speech by Peter Praet, Member of the Executive Board of the ECB, at the “la Caixa” Chair for Economics and Society conference, Madrid, 17 October 2018
- 16 October 2018
-
Weekly financial statementAnnexes
- 16 October 2018
-
Weekly financial statement - Commentary
- 16 October 2018
-
Working Paper Series - Issue No. 2187Details
- Abstract:
- The financial accounts of the household sector within the system of national accounts report the aggregate asset holdings and liabilities of all households within a country. In principle, when household wealth surveys are explicitly designed to be representative of all households, aggregating these micro data should correspond to the macro aggregates. In practice, however, differences are large. We first discuss conceptual and generic differences between those two sources of data. Thereafter we investigate missing top tail observation from wealth surveys as a source of discrepancy. By fitting a Pareto distribution to the upper tail, we provide an estimate of how much of the gap between the micro and macro data is caused by the underestimation of the top tail of the wealth distribution. Conceptual and generic differences as well as missing top tail observations explain part of the gap between financial accounts and survey aggregates.
- JEL Code:
- C46,D31,E01
- Network:
- Household Finance and Consumption Network (HFCN)
- 16 October 2018
-
Working Paper Series - Issue No. 2186Details
- Abstract:
- We provide evidence that liquidity premia on assets that are more relevant for private agents’ intertemporal choices than near-money assets increase in response to expansionary forward guidance announcements. We introduce a structural specification of liquidity premia based on assets’ differential pledgeability to a basic New Keynesian model to replicate this finding. This model predicts that output and inflation effects of forward guidance do not increase with the length of the guidance period and are substantially smaller than if liquidity premia were neglected. This indicates that there are no puzzling forward guidance effects when endogenous liquidity premia are taken into account.
- JEL Code:
- E32,E42,E52
- Network:
- N/A
- 16 October 2018
-
Research Bulletin - Issue No. 51Details
- Abstract:
- There is a strong co-movement in the prices of international commodities. This is explained by a single common factor that is closely related to fluctuations in global economic activity. The common factor, which is indicative of global demand pressures, explains a large share of commodity price fluctuations, and its importance has increased since the early 2000s, especially for oil and metal prices.
- JEL Code:
- C51,C53,Q02
- Network:
- N/A
- 15 October 2018
-
SpeechDetails
- Subtitle:
- Remarks by Luis de Guindos, Vice-President of the ECB, at the Ist Edition of the Prize José Echegaray of elEconomista, Madrid, 15 October 2018
- 14 October 2018
-
Working Paper Series - Issue No. 2185Details
- Abstract:
- In this paper we propose a composite indicator that measures multidimensional sovereign bond market stress in the euro area as a whole and in individual euro area member states. It integrates measures of credit risk, volatility and liquidity at short-term and long-term bond maturities into a broad measure of sovereign market stress. The statistical framework builds on that of the ECB’s Composite Indicator of Systemic Stress (CISS) developed by Hollo, Kremer and Lo Duca (2012), so that we call our metric the Composite Indicator of Systemic Sovereign Stress or “SovCISS”. We implement the SovCISS for eleven euro area member states and also present four options of a SovCISS for the entire monetary union. In addition, we suggest a linear decomposition of the SovCISS, singling out contributions of the different components and of the time-varying correlations across these components. Comparing develoments in the SovCISS and the CISS over the crisis period clearly illustrates the usefulness of the latter for the real-time monitoring of systemic instabilities in the financial system as a whole. Finally, an application of the country-specific SovCISS indicators to the VAR-based spillover literature suggests that stress mainly originates from a few euro area countries, and that spillover patterns vary over time.
- JEL Code:
- C43,E44,F45,G01,H63
- Network:
- N/A
- 12 October 2018
-
Working Paper Series - Issue No. 2184Details
- Abstract:
- We examine the role of trust in households’ decisions to hold a bank account and to switch to a new bank. We explore Italian household-level data that contain restricted information on the banks that the households are doing business with, as well as measures of trust in the households’ main bank and the banking sector. We find that households who distrust the banking sector are less likely to hold a bank account. Moreover, account holders are more likely to switch to a new main bank if they do not trust their current one. The estimated relationships persist over and above a range of socioeconomic variables.
- JEL Code:
- G21,G28,D14
- Network:
- Household Finance and Consumption Network (HFCN)
- 12 October 2018
-
SpeechDetails
- Subtitle:
- Statement by Mario Draghi, President of the ECB, at the thirty-eighth meeting of the International Monetary and Financial Committee, Bali (Indonesia), 12 October 2018
- 12 October 2018
-
SpeechDetails
- Subtitle:
- Speech by Sabine Lautenschläger, Member of the Executive Board of the ECB and Vice-Chair of the Supervisory Board of the ECB, Central Bank of Malta, Valletta, 12 October 2018
- 11 October 2018
-
Working Paper Series - Issue No. 2183Details
- Abstract:
- We study the optimal combination of conventional (interest rates) and unconventional (credit easing) monetary policy in a model where agency costs generate a spread between deposit and lending rates. We show that unconventional measures can be a powerful substitute for interest rate policy in the face of certain financial shocks. Such measures help shield the real economy from the deterioration in financial conditions and warrant smaller reductions in interest rates. They therefore lower the likelihood of hitting the lower bound constraint. The alternative option to cut interest rates more deeply and avoid deploying unconventional measures is sub-optimal, as it would induce unnecessarily large changes in savers' intertemporal consumption patterns.
- JEL Code:
- E44,E52,E61
- Network:
- N/A
- 11 October 2018
-
Monetary policy account
- 10 October 2018
-
Working Paper Series - Issue No. 2182Details
- Abstract:
- This paper proposes a framework for deriving early-warning models with optimal out-of-sample forecasting properties and applies it to predicting distress in European banks. The main contributions of the paper are threefold. First, the paper introduces a conceptual framework to guide the process of building early-warning models, which highlights and structures the numerous complex choices that the modeler needs to make. Second, the paper proposes a flexible modeling solution to the conceptual framework that supports model selection in real-time. Specifically, our proposed solution is to combine the loss function approach to evaluate early-warning models with regularized logistic regression and cross-validation to find a model specification with optimal real-time out-of-sample forecasting properties. Third, the paper illustrates how the modeling framework can be used in analysis supporting both microand macro-prudential policy by applying it to a large dataset of EU banks and showing some examples of early-warning model visualizations.
- JEL Code:
- G01,G17,G21,G33,C52,C54
- Network:
- N/A
- 10 October 2018
-
SpeechDetails
- Subtitle:
- Speaking points by Yves Mersch, Member of the Executive Board of the ECB, at the MNI Connect Roundtable, Singapore, 10 October 2018
- 9 October 2018
- 9 October 2018
-
Weekly financial statementAnnexes
- 9 October 2018
-
Weekly financial statement - Commentary
- 9 October 2018
-
T2S financial statement
- 9 October 2018
-
Euro money market statistics
- 5 October 2018
-
SpeechDetails
- Subtitle:
- Lectio magistralis by Luis de Guindos, Vice-President of the ECB, opening the XXIX Edition of the Masters Programme in European Union law of the University Carlos III of Madrid, 5 October 2018
- 4 October 2018
-
SpeechDetails
- Subtitle:
- Speech by Benoît Cœuré, Member of the Executive Board of the ECB, at Les Champs du Possible, Châteaudun, 4 October 2018
Annexes- 4 October 2018
- 4 October 2018
-
Occasional Paper Series - Issue No. 214Details
- Abstract:
- This study provides a conceptual and monitoring framework for systemic liquidity, as well as a legal assessment of the possible use of macroprudential liquidity tools in the European Union. It complements previous work on liquidity and focuses on the development of liquidity risk at the system-wide level. A dashboard with a total of 20 indicators is developed for the financial system, including banks and non-banks, to assess the build-up of systemic liquidity risk over time. In addition to examining liquidity risks, this study sheds light on the legal basis for additional macroprudential liquidity tools under existing regulation (Article 458 of the Capital Requirements Regulation (CRR), Articles 105 and 103 of the Capital Requirements Directive (CRD IV) and national law), which is a key condition for the implementation of macroprudential liquidity tools.
- Network:
- N/A
- 4 October 2018
-
Euro area economic and financial developments by institutional sector (early)
- 4 October 2018
-
MFI interest rate statistics
- 3 October 2018
-
Weekly financial statementAnnexes
- 3 October 2018
-
Weekly financial statement - Commentary
- 3 October 2018
-
SpeechDetails
- Subtitle:
- Keynote speech by Yves Mersch, Member of the Executive Board of the ECB, at the Latvijas Banka conference “Payments in the 22nd century: future starts today?”, Riga, 3 October 2018
- 2 October 2018
-
Macroprudential Bulletin - Foreword - Issue No. 6
- 2 October 2018
-
Balance of payments (quarterly)
- 2 October 2018
-
Other publicationDetails
- Subtitle:
- Methodological notes
- Network:
- N/A
- 2 October 2018
-
Macroprudential Bulletin - Article - Issue No. 6Details
- Abstract:
- This article summarises the key findings from a counterfactual exercise where the effect of removing repo assets from the leverage ratio on banks’ default probabilities is considered. The findings suggest that granting such an exemption may have adverse effects on the stability of the financial system, even when measures are introduced to compensate for the decline in capital required by the leverage ratio framework. Increases in probabilities of default are mainly seen for larger banks which are more active in the repo market. Moreover, it is observed that the predictive power of the model improves when repo assets are included. Overall, the analysis in this article does not support a more lenient treatment of repo assets in the leverage ratio framework, e.g. by exempting them or allowing for more netting with repo liabilities or against high-quality government bonds.
- JEL Code:
- G01,G21,G28
- 2 October 2018
-
Macroprudential Bulletin - Article - Issue No. 6Details
- Abstract:
- This article evaluates whether the global systemically important bank (G-SIB) framework has incentivised banks to adopt window-dressing behaviour, and whether their engagement in capital market activities has facilitated it. Window-dressing behaviour could have detrimental effects on financial stability, for at least two reasons: first, it may imply an underestimation of banks’ overall systemic importance and a distortion of the relative ranking in favour of banks that engage in more window-dressing behaviour; second, overall market functioning may be adversely affected if banks reduce the provision of certain services towards the end of the year. The evidence presented in this article suggests that both G-SIBs and banks with reporting obligations have reduced their overall risk score and some of their individual risk indicators at the end of a calendar year, both in absolute terms and relative to the other banks in the sample. The results also indicate that year-end reductions in capital market activities are a main driver of the observed window-dressing behaviour.
- JEL Code:
- G21,G28,G38
- 2 October 2018
-
Macroprudential Bulletin - Article - Issue No. 6Details
- Abstract:
- This article aims to facilitate discussion on potential macroprudential tools for investment funds. To this end, the article puts forward an initial assessment based on the application of a conceptual framework and aims to inform the debate on the potential design aspects of macroprudential liquidity tools. In line with the ESRB’s approach to developing macroprudential instruments, the effectiveness and efficiency of various macroprudential liquidity tools for investment funds are thoroughly assessed. The article provides an overview of the various liquidity tools and assesses the suitability of these tools for containing the materialisation of systemic risks through various channels.
- JEL Code:
- G23,G28,E61
- 2 October 2018
-
Macroprudential Bulletin - Annex - Issue No. 6
- 1 October 2018
-
Working Paper Series - Issue No. 2181Details
- Abstract:
- We develop a structural model for valuing bank balance sheet components such as the equity and debt value, the value for the government when the bank is operated by private shareholders including the present value of a possible future bailout, the bailout value incurred by the government following the abandonment of the private shareholders, and, moreover, some price and risk parameters, including the funding cost spread and the banks’ probability of default. The structural model implies an abandonment threshold, at which if total income drops below this threshold, private shareholders abandon the bank. In this case, the shareholders lose part (or all) of the capital that they hold in the bank, the creditors lose part or all of their debt, and the government receives a portion (or all) of the capital and all of the debt that is not recovered by creditors. Hence, we assume that part of the capital can be lost due to financial distress or to cover bankruptcy costs. We use the model framework to assess the impact of capital-based macro-prudential policy measures and focus in particular on assessing the difference that an assumed bail-in as opposed to bail-out regime can make.
- JEL Code:
- G21,G28,H81
- Network:
- N/A
- 1 October 2018
-
Occasional Paper Series - Issue No. 213Details
- Abstract:
- In this report, three methodological approaches are applied to assess the size of the International Monetary Fund: benchmarking Fund resources against a number of relevant global economic and financial indicators; an extrapolation of past and current IMF programme characteristics; and a shock scenario analysis. Overall, while the results of the different approaches depend on the assumptions and the timeframe considered, the quantitative analysis indicates that a prudent approach would call for maintaining Fund total resources at their current levels. Yet, the quantitative analysis of the size of the Fund made in this report should be seen only as one element to assess the adequacy of Fund resources. It does not take into account qualitative considerations, such as the increased resilience of the global economy and the efforts made to strengthen regulation and supervision since the financial crisis, which should complement the quantitative analysis to complete the analytical basis for decision makers. Moreover, the final decision on the appropriate size of Fund resources will need to include political judgement. Therefore, this report does not provide recommendations on the appropriate level of IMF resources after the expiration of borrowed resources.
- JEL Code:
- F3,F32,F38,F42,F65,G28
- Network:
- N/A
- 1 October 2018
-
InterviewDetails
- Subtitle:
- Interview with Benoît Cœuré, Member of the Executive Board of the ECB, conducted by Carla Neuhaus on 19 September 2018 published on 1 October 2018
- 28 September 2018
- 28 September 2018
-
Other publicationThe European Central Bank's response to the Decision of the European Ombudsman in case 1697-2016-ANADetails
- Network:
- N/A
- 28 September 2018
-
Governing Council decisions - Other decisions
- 27 September 2018
-
SpeechDetails
- Subtitle:
- Speech by Peter Praet, Member of the Executive Board of the ECB, at the Money, Macro and Finance Research Group Conference on the Resilience of the Global Financial Architecture, London, 27 September 2018
- 27 September 2018
-
SpeechDetails
- Subtitle:
- Mario Draghi, President of the ECB and Chair of the European Systemic Risk Board, third annual conference of the ESRB, Frankfurt am Main, 27 September 2018.
- 27 September 2018
-
Other publication - Issue No. 2018Details
- Subtitle:
- for statistics on holdings of securities by reporting banking groups (SHSG)
- Network:
- N/A
- 27 September 2018
-
Monetary developments in the euro area
- 27 September 2018
-
Economic Bulletin - BoxEconomic Bulletin Issue 6, 2018Details
- Abstract:
- This box describes the ECB's monetary policy operations during the third and fourth reserve maintenance periods of 2018, which ran from 3 May to 19 June 2018 and from 20 June to 31 July 2018 respectively. Throughout this period the interest rates on the main refinancing operations (MROs), the marginal lending facility and the deposit facility remained unchanged at 0.00%, 0.25% and â0.40% respectively.
- JEL Code:
- E40,E52,E58
- 27 September 2018
-
Economic Bulletin
- 27 September 2018
-
Economic Bulletin - ArticleEconomic Bulletin Issue 6, 2018Details
- Abstract:
- As financial markets became progressively more integrated internationally over the past decades, economists wondered to what extent policymakers can isolate domestic financial conditions from external factors. This article reviews the terms of this debate and provides fresh evidence on the co-movement in capital flows and stock prices across a panel of 50 advanced and emerging economies. In particular, the article focuses on the relative importance of global risk and US monetary policy for the global financial cycle and touches upon the implications for the exchange rate regime. Global risk aversion emerges as a significant driver of capital flows and stock returns and its impact is amplified by capital account openness, but not necessarily by the exchange rate regime, which matters only for asset prices, not for capital flows. The quantitative relevance of US monetary policy and the US dollar exchange rate seems to be episodic. In particular, the correlation between US interest rates and capital flows throughout the crisis is positive, rather than negative as the theory would predict, indicating the need for further empirical analysis of the role of US monetary policy as the driver of the global financial cycle. The article also finds that financial market tensions have been typically synchronised between the euro area and the United States but that financial conditions in the two areas have often decoupled. Overall, this confirms that the effectiveness of the ECB’s monetary policy has not been impaired by the global financial cycle.
- JEL Code:
- E42,E52,F31,F36,F41
- 26 September 2018
-
Card fraud report - Issue No. 2018
- 26 September 2018
-
Press release
- 26 September 2018
-
Economic Bulletin - BoxEconomic Bulletin Issue 6, 2018Details
- Abstract:
- The global trading landscape has changed rapidly in recent months. Announcements of tariffs by the US Administration and retaliation by its trading partners have raised concerns about a possible 'trade war' and, potentially, a broader reversal of globalisation. On 1 March the US Administration announced tariffs of 25% on imports of steel and 10% on imports of aluminium from a wide range of countries. The first wave of tariffs relating to technology transfers on Chinese imports took effect on 6 July, followed by the announcement of retaliation in kind by the Chinese authorities. In response to the Chinese retaliation, the US Administration threatened to impose additional tariffs. In parallel, the EU and Canada implemented retaliatory measures against the US tariffs on steel and aluminium. Finally, the US Administration initiated a new investigation of imports of cars, trucks and auto parts (to determine their effects on national security) which could result in additional tariffs. Recently, however, there have also been some signs of a reduction in trade tensions resulting from a meeting between US and EU officials as well as the new NAFTA arrangements between the United States and Mexico.
- JEL Code:
- F13,F17,C54
- 25 September 2018
-
Working Paper Series - Issue No. 2180Details
- Abstract:
- We offer a macroeconomic assessment of China’s Reform Period, highlighting several neglected channels underlining its great expansion. Estimating the supply side of the post-Reform economy reveals the relatively high (above unity) value of the elasticity of factor substitution and the time-varying pattern of factor-saving technical change. The latter we relate to trade, human capital and reallocation factors. We then demonstrate how, in addition to factor accumulation and technical progress, the above-unity elasticity of substitution can be a source of growth (the ‘de La Grandville hypothesis’). We then draw upon our estimated framework to rationalize China’s high and rising savings ratio as well as the dynamic nature of its convergence path.
- JEL Code:
- D24,E13,O11
- Network:
- N/A
- 25 September 2018
-
Weekly financial statementAnnexes
- 25 September 2018
-
Weekly financial statement - Commentary
- 25 September 2018
-
SpeechDetails
- Subtitle:
- Speech by Benoît Cœuré, Member of the Executive Board of the ECB, at the ECB’s Money Market Contact Group meeting, Frankfurt am Main, 25 September 2018
- 25 September 2018
-
Economic Bulletin - BoxEconomic Bulletin Issue 6, 2018Details
- Abstract:
- This box looks at the evolution of the fiscal impact of the financial sector support measures taken in the ten years since the financial crisis struck. It takes stock of the fiscal costs of the crisis and the extent to which the recovery has helped to recoup them. This is done by focusing on the measures' impact on deficits and debt, and on the state guarantees granted to banks and other financial institutions. Steps have been taken since the crisis to improve the supervision of the financial sector, the orderly resolution of failing financial institutions, the sustainability of public finances and the resilience of sovereigns, for example by establishing bodies like the Single Supervisory Mechanism, the Single Resolution Mechanism and the European Fiscal Board.
- JEL Code:
- G01,H12,H62,H63
- 25 September 2018
-
Economic Bulletin - ArticleEconomic Bulletin Issue 6, 2018Details
- Abstract:
- Private sector inflation expectations are a key component of a broad range of indicators that the ECB considers when determining the appropriate monetary policy stance for achieving its price stability objective. Inflation expectations can not only affect inflation itself through the wage and price-setting processes, but also serve as a useful cross-check on the ECB’s and the Eurosystem’s own projections. This article focuses on market-based measures of longer-term inflation expectations, which are timely indicators derived from the prices of instruments that are traded in financial markets and linked to future inflation outcomes. It reviews recent developments in the information that can be extracted from different types of market-based indicator, starting from the period leading up to the ECB’s announcement of its expanded asset purchase programme (APP). The fall in market-based indicators of longer-term inflation expectations between 2014 and mid-2016 was consistent across major jurisdictions, possibly reflecting global concerns about weak aggregate demand and associated disinflationary pressures. Their subsequent recovery has been driven by a partial dissipation of these concerns and, in particular, a significant improvement in the euro area macroeconomic environment. The lion’s share of the movement in longer-term inflation expectations over the past few years has stemmed from the inflation risk component of these indicators, suggesting that the balance of risks to the inflation outlook has been one of the main drivers. Indeed, information extracted from the prices of inflation options implies that the risk-neutral probability of deflation increased noticeably in late 2014 and early 2015, before declining more recently.
- JEL Code:
- E44,G12,G01
- 24 September 2018
-
Working Paper Series - Issue No. 2179Details
- Abstract:
- In this paper, we analyse the effects of a shock to global financial uncertainty and risk aversion on real economic activity. To this end, we extract a global factor, which explains approximately 40% of the variance of about 1000 risky asset returns from around the world. We then study how shocks to the factor affect economic activity in 36 advanced and emerging small open economies by estimating local projections in a panel regression framework. We find the output responses to be quite heterogeneous across countries but, in general, negative and persistent. Furthermore, the effects of shocks to the global factor are stronger in countries with a higher degree of trade and/or financial openness, as well as in countries with higher levels of external debt, less developed financial sectors, and higher risk rating.
- JEL Code:
- C30,F41,E32,F65
- Network:
- N/A
- 24 September 2018
-
Working Paper Series - Issue No. 2178Details
- Abstract:
- The literature on fiscal multipliers finds that spending-based fiscal consolidations tend to have more benign macro-economic consequences than revenue-based consolidations. By directly comparing expost data with consolidation plans, we present evidence of a systematically weaker follow-up of spending-based consolidation plans. Next, using a newly-developed dataset of consolidation announcements, panel VAR regressions confirm the weaker follow-up of spending-based plans and their more benign macro-economic effects compared to those of revenue-based plans. We disentangle the role of the difference in follow-up from that of the difference in the composition of revenue- and spending-based consolidations. While the latter channel, which works through the difference between revenue and spending multipliers, explains the largest fraction of the difference in economic trajectories, the difference in follow-up plays a non-negligible role as well.
- JEL Code:
- E21,E62,H5
- Network:
- N/A
- 24 September 2018
-
SpeechDetails
- Subtitle:
- Introductory Statement by Mario Draghi, President of the ECB, at the ECON committee of the European Parliament, Brussels, 24 September 2018
Annexes- 24 September 2018
- 24 September 2018
-
Discussion Paper Series - Issue No. 7Details
- Abstract:
- This paper identifies the various channels that give rise to a "sovereign-bank nexus" whereby the financial health of banks and sovereigns is intertwined. We find that banks and sovereigns are linked by three interacting channels: banks hold large amounts of sovereign debt; banks are protected by government guarantees; and the health of banks and governments affect and is affected by economic activity. Evidence suggests that all three channels are relevant. The paper concludes with a discussion of the policy implications of these findings.
- JEL Code:
- E62,F34,G01,G21
- 24 September 2018
-
Economic Bulletin - ArticleEconomic Bulletin Issue 6, 2018Details
- Abstract:
- This article presents the developments in the circulation of euro banknotes and the underlying drivers of cash demand in the euro area and abroad. Cash in circulation is on the rise, both in the euro area and abroad. In addition, data from a survey on the use of cash in the euro area indicates that by volume and number of transactions cash remained the most used payment instrument in 2016. However, the growth in banknote circulation can only partially be explained by transaction demand. Most euro banknotes in circulation are used as a store of value and households and firms inside and outside of the euro area obviously value the option of storing part of their assets in central bank money. Considering the currently low opportunity costs of holding cash, the stored euro banknotes can be expected to return if interest rates were to increase. However, as shown by developments over the past ten years, the store of value function is determined not only by interest rates, but also by external events which cannot be predicted. The demand for banknotes has also been impacted by various additional factors such as the financial and sovereign debt crises, geopolitical uncertainties, exchange rate developments and policy decisions
- JEL Code:
- D12,E41,E42
- Network:
- Eurosystem Research Network on Cash (EURECA)
- 24 September 2018
-
Economic Bulletin - BoxEconomic Bulletin Issue 6, 2018Details
- Abstract:
- Oil prices affect private consumption through direct and indirect channels. An increase in oil prices affects households' purchasing power directly through higher prices for oil-based energy products (e.g. petrol, heating oil). In the euro area about one-third of the economy's total oil use is in the form of final consumption, i.e. the use by consumers of such products. The other two-thirds comes from oil being used in the production of non-energy goods. A rise in oil prices implies an increase in the production costs of these sectors. If these costs cannot be passed on to the final prices of these goods, there will be an indirect impact on households' purchasing power, since either wages or profits received from these sectors will be lower. Moreover, for advanced economies that produce oil (e.g. Canada, Norway, the United Kingdom and the United States) the indirect effects through wages and profits from the oil-producing sector are even more important.
- JEL Code:
- E01,E21
- 23 September 2018
-
Working Paper Series - Issue No. 2177Details
- Abstract:
- This paper identifies the various channels that give rise to a “sovereign-bank nexus” whereby the financial health of banks and sovereigns is intertwined. We find that banks and sovereigns are linked by three interacting channels: banks hold large amounts of sovereign debt; banks are protected by government guarantees; and the health of banks and governments affect and is affected by economic activity. Evidence suggests that all three channels are relevant. The paper concludes with a discussion of the policy implications of these findings.
- JEL Code:
- E62,F34,G01,G21
- Network:
- Discussion papers
- 23 September 2018
-
Working Paper Series - Issue No. 2176Details
- Abstract:
- We study the allocation of interest rate risk within the European banking sector using novel data. Banks’ exposure to interest rate risk is small on aggregate, but heterogeneous in the cross-section. In contrast to conventional wisdom, net worth is increasing in interest rates for approximately half of the institutions in our sample. Cross-sectional variation in banks’ exposures is driven by cross-country differences in loan-rate fixation conventions for mortgages. Banks use derivatives to partially hedge on-balance sheet exposures. Residual exposures imply that changes in interest rates have redistributive effects within the banking sector.
- JEL Code:
- G21,E43,E44
- Network:
- N/A
- 21 September 2018
-
Research Bulletin - Issue No. 50Details
- Abstract:
- Central bank announcements simultaneously convey information about monetary policy and the economic outlook. We use changes in interest rate expectations and stock prices around the time of policy announcements to disentangle the impact of news about monetary policy from that of news about the economic outlook. We find that both play a significant role in the dynamics of inflation and economic growth, and that controlling for news about the economy helps us to measure more accurately the transmission of monetary policy.
- JEL Code:
- E32,E52,E58
- Network:
- N/A
- 20 September 2018
-
SpeechDetails
- Subtitle:
- Speech by Peter Praet, Member of the Executive Board of the ECB, at the SUERF conference “Sustainable Policy Responses: EU and US Perspectives”, New York, 20 September 2018
- 19 September 2018
-
SpeechDetails
- Subtitle:
- Speech by Mario Draghi, President of the ECB, at the Europa-Konferenz at Hertie School of Governance organised by the Jacques Delors Institute, Berlin, 19 September 2018
- 19 September 2018
-
Balance of payments (monthly)
- 18 September 2018
-
Weekly financial statementAnnexes
- 18 September 2018
-
Weekly financial statement - Commentary
- 18 September 2018
-
SpeechDetails
- Subtitle:
- Speech by Mario Draghi, President of the ECB, at the ACPR Conference on Financial Supervision, Paris, 18 September 2018
- 17 September 2018
-
Other publicationDetails
- Network:
- N/A
- 17 September 2018
-
Press release
- 17 September 2018
-
SpeechDetails
- Subtitle:
- Presentation by Peter Praet, Member of the Executive Board of the ECB, to the Société Royale d’Economie Politique, Brussels, 17 September 2018
- 17 September 2018
-
SpeechDetails
- Subtitle:
- Speech by Benoît Cœuré, Member of the Executive Board of the ECB, at the Deutsches Institut für Wirtschaftsforschung, 17 September 2018
Annexes- 17 September 2018
- 17 September 2018
-
Other publicationDetails
- Subtitle:
- 2017 annual report on the main characteristics and quality aspects of the statistics underlying the Macroeconomic Imbalance Procedure
- Network:
- N/A
- 14 September 2018
- 14 September 2018
-
Payment instruments and systems
- 14 September 2018
- 14 September 2018
- 14 September 2018
- 14 September 2018
- 14 September 2018
- 13 September 2018
-
Working Paper Series - Issue No. 2175Details
- Abstract:
- This paper develops Area-wide Leading Inflation CyclE (ALICE) indicators for euro area headline and core inflation with an aim to provide early signals about turning points in the respective inflation cycle. The series included in the two composite leading indicators are carefully selected from around 160 candidate leading series using a general-to-specific selection process. The headline ALICE includes nine leading series and has a lead time of 3 months while the core ALICE consists of seven series and leads the reference cycle by 4 months. The lead times of the indicators increase to 5 and 9 months, respectively, based on a subset of the selected leading series with longer leading properties. Both indicators identify main turning points in the inflation cycle ex post and perform well in a simulated real-time exercise over the period from 2010 to the beginning of 2018. They also have performed well in forecasting the direction of inflation. In terms of the quantitative forecast accurracy, the headline ALICE has on average performed broadly similarly to the Euro Zone Barometer survey, slightly worse than the Eurosystem/ECB Staff macroeconomic projections and better than the Random Walk model, albeit this is not the case for the core ALICE.
- JEL Code:
- C32,C52,C53,E31,E37
- Network:
- N/A
- 13 September 2018
-
Macroeconomic projections for the euro areaAnnexes
- 13 September 2018
- 13 September 2018
-
Monetary policy statement
- 13 September 2018
-
Monetary policy decision
- 13 September 2018
- 12 September 2018
-
Euro area securities issues statistics
- 11 September 2018
-
Weekly financial statementAnnexes
- 11 September 2018
-
Weekly financial statement - Commentary
- 10 September 2018
-
Euro area insurance corporations statistics
- 6 September 2018
-
SpeechDetails
- Subtitle:
- Statement by Sabine Lautenschläger, Member of the Executive Board of the ECB and Vice-Chair of the Supervisory Board of the ECB, at The Eurofi Financial Forum 2018, Vienna, 6 September 2018
- 6 September 2018
-
SpeechDetails
- Subtitle:
- Speech by Yves Mersch, Member of the Executive Board of the ECB, ESCB Legal Conference, Frankfurt, 6 September 2018
- 5 September 2018
-
SpeechDetails
- Subtitle:
- Remarks by Peter Praet, Member of the Executive Board of the ECB, at the Eurofi Financial Forum 2018, Vienna, 5 September 2018
- 5 September 2018
-
Research Bulletin - Issue No. 49Details
- Abstract:
- Economists often try to forecast whether the economy as a whole will grow or contract. When measuring the effects of fiscal policy measures on economic activity, such forecasts are based on so-called multipliers. Using a new dataset compiled from economic forecasts and recommendations by the European Commission under the excessive deficit procedure of the Stability and Growth Pact, we derive the multipliers that were assumed by forecasters during the European sovereign debt crisis to project the effects of fiscal consolidation on economic growth. Our results confirm that forecasters adapted their assumptions on multipliers as the crisis progressed and accounted for larger effects of consolidation on growth later on in the crisis. Another finding is that the actual fiscal multipliers were not exceptionally large during the crisis.
- JEL Code:
- E32,E62,H20,H5
- Network:
- N/A
- 5 September 2018
-
InterviewDetails
- Subtitle:
- Interview with Benoît Cœuré, Member of the Executive Board of the ECB, conducted by Eirini Chrysolora and published on 5 September 2018
- 4 September 2018
-
Weekly financial statementAnnexes
- 4 September 2018
-
Weekly financial statement - Commentary
- 3 September 2018
-
MFI interest rate statistics
- 3 September 2018
-
SpeechDetails
- Subtitle:
- Speech by Yves Mersch, Member of the Executive Board of the ECB, at the European Institute of Financial Regulation (EIFR), Paris, 3 September 2018
- 31 August 2018
-
SpeechDetails
- Subtitle:
- Speech by Luis de Guindos, Vice-President of the ECB, at La Granda courses, Asturias, 31 August 2018
- 29 August 2018
- 28 August 2018
-
Weekly financial statementAnnexes
- 28 August 2018
-
Weekly financial statement - Commentary
- 28 August 2018
-
SpeechDetails
- Subtitle:
- Presentation by Peter Praet, Member of the Executive Board of the ECB, at the 33rd Annual Congress of European Economic Association, Cologne, 28 August 2018
- 28 August 2018
-
Other publicationDetails
- Network:
- N/A
- 28 August 2018
-
Monetary developments in the euro area
- 23 August 2018
-
Monetary policy account
- 22 August 2018
-
Forum on Central Banking - Conference proceedings
- 21 August 2018
-
Weekly financial statementAnnexes
- 21 August 2018
-
Weekly financial statement - Commentary
- 21 August 2018
-
Euro money market statistics
- 20 August 2018
-
Euro area financial vehicle corporation statistics
- 20 August 2018
-
Euro area investment fund statistics
- 17 August 2018
- 17 August 2018
-
Balance of payments (monthly)
- 14 August 2018
-
Weekly financial statementAnnexes
- 14 August 2018
-
Weekly financial statement - Commentary
- 9 August 2018
-
Euro area securities issues statistics
- 9 August 2018
-
Economic Bulletin - BoxEconomic Bulletin Issue 5, 2018Details
- Abstract:
- The degree of business cycle synchronisation, both across the euro area countries as well as between the euro area and the rest of the world, is a pertinent research question. Regarding the euro area, the endogenous optimal currency area (OCA) hypothesis suggests that the degree of business cycle synchronisation among the participating countries should increase over time as a result of deepening financial and trade integration. Individual countries should thus become less exposed to idiosyncratic shocks, facilitating the effectiveness of the single monetary policy. Against this background, this box presents and analyses several measures of business cycle synchronisation both within the euro area as well as from a global perspective.
- JEL Code:
- E32
- 9 August 2018
-
Economic Bulletin
- 9 August 2018
-
Economic Bulletin - BoxEconomic Bulletin Issue 5, 2018Details
- Abstract:
- The euro area current account balance stood at the historically high level of 3.6% of GDP in the year up to the first quarter of 2018, slightly above the level of 3.5% of GDP recorded one year earlier. The slight increase in the current account surplus however masks significant decreases in the surplus on trade in goods (by 0.2 percentage point of GDP) as well as in the surplus on primary income (by 0.3 percentage point of GDP), which were slightly more than offset by an increase in the surplus on trade in services (by 0.5 percentage point of GDP).
- JEL Code:
- F32,F41
- 9 August 2018
-
Economic Bulletin - BoxEconomic Bulletin Issue 5, 2018Details
- Abstract:
- The Chinese economy has recently been playing a key role in the global economic recovery. Recording growth rates of more than 6.5% over the past five years, China has contributed on average one-third of total global growth. It has also become one of the euro area's largest trading partners, accounting for almost 7% of total extra-euro area exports. While the world economy has benefited from China's economic strength and growing importance, a downturn would also have large repercussions for global activity. In fact, imbalances in China have been identified as a key external downside risk to the euro area and world economy. One catalyst for such a risk materialising could be the housing market.
- JEL Code:
- C01,E00
- 9 August 2018
-
Economic Bulletin - ArticleEconomic Bulletin Issue 5, 2018Details
- Abstract:
- This article examines the evolution of the ECB’s accountability practices during the financial crisis. After describing the challenges stemming from the crisis and changes resulting from the conferral of new supervisory tasks on the ECB, it provides evidence on how the strengthening of the ECB’s accountability has taken shape in the context of its relationship with the European Parliament in line with the latter’s key role as provided for in the Treaties. The ECB and the European Parliament, building on the accountability framework enshrined in primary law, have increased the frequency of their interactions, made innovations regarding the format and sharpened the focus of their exchanges, allowing increased scrutiny of the ECB’s policies. This has provided the ECB with more opportunities to explain its decisions and demonstrate that it is acting in accordance with its democratic mandate, which is a fundamental pillar of its legitimacy.
- JEL Code:
- E52,E58
- 9 August 2018
-
Economic Bulletin - BoxEconomic Bulletin Issue 5, 2018Details
- Abstract:
- Loans to households for house purchase appear to have grown at a moderate rate in recent years, despite very favourable financing conditions, the recovery in economic activity and dynamic housing markets. The annual growth rate of adjusted loans to households for house purchase was 2.8% in the first quarter of 2018, having increased gradually from slightly above 0% in 2014. However, when assessing loan developments, it should be noted that loan growth figures are usually reported in net terms, i.e. newly originated loans and the repayments of previously granted loans are considered together because statistics on balance sheet items are derived from stock figures. Given the long-term nature of mortgage contracts, loan repayments have a long-lasting impact on net figures, especially after a boom, and thus obfuscate the prevailing lending dynamics. Against this background, this box presents the results of a simulated portfolio approach which decomposes net lending flows into loan origination and the repayments of previously granted outstanding loans. Examining these two components separately provides a better view of current loan developments.
- JEL Code:
- E17,E44,G01,D14
- 8 August 2018
-
Economic Bulletin - ArticleEconomic Bulletin Issue 5, 2018Details
- Abstract:
- This article documents the key role that private consumption has played in recent output growth (2013-18), and asks how long the current growth in consumption can continue and whether it is self-sustaining. To that end, this article tries to identify the relative importance of different factors driving consumption, such as the recovery in the labour market, accommodative monetary policy, the 2014-15 drop in oil prices, the increase in asset prices, the easing of credit conditions and deleveraging. As the fall in consumption from 2008 to 2013 was very heterogeneous across countries, this article also sheds light on the extent to which the current expansion has actually led to a net increase in consumption over the past decade. This is relevant because private consumption is also a prime indicator of the economic well-being of households. While the growth of consumption has been low compared with previous expansions, since 2013 it has exceeded initial expectations. It has been driven mainly by the recovery in the labour market, even though unemployment in some countries and for some groups of workers remains higher than before 2008. Looking forward, as labour markets continue to improve, private consumption should expand further in all countries and for all groups of workers. Through its impact on the labour market, the ECB’s accommodative monetary policy is not only contributing to the expansion of private consumption, but also to a decrease in inequality. At the same time, there is little evidence that low interest rates have led to generalised increases in household indebtedness, supporting the sustainability of the overall economic expansion.
- JEL Code:
- D31,E21,E32,E50
- 7 August 2018
-
Weekly financial statementAnnexes
- 7 August 2018
-
Weekly financial statement - Commentary
- 7 August 2018
-
Other publication
- 7 August 2018
-
Economic Bulletin - BoxEconomic Bulletin Issue 5, 2018Details
- Abstract:
- In current forecasts and projections, a pick-up in labour costs is considered an important precondition for a sustained increase in underlying inflation. However, the signals provided by different labour cost indicators have been mixed for some time. While wage growth as measured by compensation per employee or by compensation per hour worked has clearly strengthened over the past two years, unit labour cost growth, i.e. wage growth adjusted for productivity growth, has remained rather flat over the same period. This begs the question: which labour cost indicators provide the relevant signal for the pass-through to, and the outlook for, underlying inflation? This box tries to shed some light on this issue by analysing the transmission of two different types of macroeconomic impulse, namely certain kinds of supply and demand shock, in the context of the New Area-Wide Model, and by comparing the results with the patterns of development observed in the recent past.
- JEL Code:
- E31,J30
- 7 August 2018
-
Economic Bulletin - ArticleEconomic Bulletin Issue 5, 2018Details
- Abstract:
- The overnight money market plays an important role in the implementation and transmission of monetary policy in the euro area. Money market fragmentation is a sign of impairment in the transmission mechanism which merits the close monitoring of a set of suitable indicators. This article discusses concepts and measurement of fragmentation and proposes a new measure of fragmentation from a monetary policy transmission perspective.
- JEL Code:
- D53,E43,E50
- 6 August 2018
- 6 August 2018
-
Economic Bulletin - BoxEconomic Bulletin Issue 5, 2018Details
- Abstract:
- Within the EU governance framework for the coordination of economic policies, the country-specific recommendations (CSRs) represent an integral part of the annual European Semester process. They provide guidance to individual EU Member States on how to address structural reform needs and macroeconomic imbalances in the following 12-18 months. CSRs are the instrument through which EU national economic policies are treated as a matter of common concern and coordinated within the Council of the European Union in accordance with Article 121 of the Treaty on the Functioning of the European Union. They therefore constitute a cornerstone of the EU's macroeconomic imbalance procedure (MIP), whose aim is to prevent, detect and correct macroeconomic imbalances in individual countries, thereby containing risks to the smooth functioning of Economic and Monetary Union (EMU). Their timely and proper implementation is critical to reducing vulnerabilities and strengthening the economic resilience of the euro area and the EU as a whole, ultimately leading to higher growth potential in the long term. Against the background of the 2018 CSRs received by 27 EU Member States (i.e. all excluding Greece ), this box examines the policy recommendations addressed to 18 euro area countries, with the exception of those that pertain strictly to the implementation of the EU's Stability and Growth Pact.
- JEL Code:
- E60,F42
- 5 August 2018
-
InterviewDetails
- Subtitle:
- Interview with Sabine Lautenschläger, Member of the Executive Board of the ECB and Vice-Chair of the Supervisory Board of the ECB, conducted by Anja Ettel and Anne Kunz on 30 July 2018 and published on 5 August 2018
- 1 August 2018
-
Working Paper Series - Issue No. 2174Details
- Abstract:
- This paper studies the effects of money supply shocks in a general equilibrium model that reproduces a term premium of the magnitude observed in the data. In an environment where financial frictions are the main source of monetary non-neutrality, I find that money supply shocks are less effective at stimulating inflation in recessions than in expansions. In terms of quantitative magnitude, the impact effect on inflation of a money supply shock is about half as large during recessions than during booms. This state dependence is essentially due to the time-variation in stochastic discounting that is needed to match the data.
- JEL Code:
- E31,E44,E58
- Network:
- Research Task Force (RTF)
- 1 August 2018
-
Working Paper Series - Issue No. 2173Details
- Abstract:
- We show that negative policy rates affect the supply of bank credit in a novel way. Banks are reluctant to pass on negative rates to depositors, which increases the funding cost of high-deposit banks, and reduces their net worth, relative to low-deposit banks. As a consequence, the introduction of negative policy rates by the European Central Bank in mid-2014 leads to more risk taking and less lending by euro-area banks with greater reliance on deposit funding. Our results suggest that negative rates are less accommodative, and could pose a risk to financial stability, if lending is done by high-deposit banks.
- JEL Code:
- E44,E52,E58,G20,G21
- Network:
- Research Task Force (RTF)
- 1 August 2018
-
Euro area securities issues statistics
- 1 August 2018
-
MFI interest rate statistics
- 31 July 2018
-
Weekly financial statementAnnexes
- 31 July 2018
-
Weekly financial statement - Commentary
- 27 July 2018
-
Governing Council decisions - Other decisions
- 27 July 2018
-
Euro area economic and financial developments by institutional sector (full)
- 27 July 2018
- 27 July 2018
- 27 July 2018
-
Survey of Professional Forecasters
- 27 July 2018
- 26 July 2018
-
Working Paper Series - Issue No. 2172Details
- Abstract:
- This paper develops a two-country model with asset market segmentation to investigate the effects of quantitative easing implemented by the major central banks on a typical small open economy that follows independent monetary policy. The model is able to replicate the key empirical facts on emerging countries’ response to large scale asset purchases conducted abroad, including inflow of capital to local sovereign bond markets and an increase in international comovement of term premia. According to our simulations, quantitative easing abroad boosts domestic demand in the small economy, but undermines its international competitiveness and depresses aggregate output, at least in the short run. This is in contrast to conventional monetary easing in the large economy, which has positive spillovers to output in other countries. We also find that limiting these spillovers might require policies that affect directly international capital flows, like imposing capital controls or mimicking quantitative easing abroad by purchasing local long-term bonds.
- JEL Code:
- E44,E52,F41
- Network:
- N/A
- 26 July 2018
-
Working Paper Series - Issue No. 2171Details
- Abstract:
- Outlier detection in high-dimensional datasets poses new challenges that have not been investigated in the literature. In this paper, we present an integrated methodology for the identification of outliers which is suitable for datasets with higher number of variables than observations. Our method aims to utilise the entire relevant information present in a dataset to detect outliers in an automatized way, a feature that renders the method suitable for application in large dimensional datasets. Our proposed five-step procedure for regression outlier detection entails a robust selection stage of the most explicative variables, the estimation of a robust regression model based on the selected variables, and a criterion to identify outliers based on robust measures of the residuals' dispersion. The proposed procedure deals also with data redundancy and missing observations which may inhibit the statistical processing of the data due to the ill-conditioning of the covariance matrix. The method is validated in a simulation study and an application to actual supervisory data on banks’ total assets.
- JEL Code:
- C18,C81,G21
- Network:
- N/A
- 26 July 2018
- 26 July 2018
- 26 July 2018
-
Monetary policy statementDetails
- Subtitle:
- Mario Draghi, President of the ECB,Luis de Guindos, Vice-President of the ECB,Frankfurt am Main, 26 July 2018
- 26 July 2018
-
Monetary policy decision
- 25 July 2018
-
Monetary developments in the euro area
- 24 July 2018
-
Weekly financial statementAnnexes
- 24 July 2018
-
Weekly financial statement - Commentary
- 24 July 2018
-
Euro area bank lending survey - Issue No. 2017
- 24 July 2018
-
Press release
- 20 July 2018
-
Balance of payments (monthly)
- 18 July 2018
-
Discussion Paper Series - Issue No. 6Details
- Abstract:
- This paper considers how monetary policy produces heterogeneous effects on euro area households, depending on the composition of their income and on the components of their wealth. We first review the existing evidence on how monetary policy affects income and wealth inequality. We then illustrate quantitatively how various channels of transmission—net interest rate exposure, intertemporal substitution and indirect income channels—affect individual euro area households. We find that the indirect income channel has an overwhelming importance, especially for households holding few or no liquid assets. The indirect income channel is therefore also a substantial driver of changes in consumption at the aggregate level.
- JEL Code:
- D14,D31,E21,E52,E58
- 17 July 2018
-
Working Paper Series - Issue No. 2170Details
- Abstract:
- This paper considers how monetary policy produces heterogeneous effects on euro area households, depending on the composition of their income and on the components of their wealth. We first review the existing evidence on how monetary policy affects income and wealth inequality. We then illustrate quantitatively how various channels of transmission — net interest rate exposure, inter-temporal substitution and indirect income channels — affect individual euro area households. We find that the indirect income channel has an overwhelming importance, especially for households holding few or no liquid assets. The indirect income channel is therefore also a substantial driver of changes in consumption at the aggregate level.
- JEL Code:
- D14,D31,E21,E52,E58
- Network:
- Discussion papers
- 17 July 2018
-
Weekly financial statementAnnexes
- 17 July 2018
-
Weekly financial statement - Commentary
- 16 July 2018
-
Occasional Paper Series - Issue No. 212Details
- Abstract:
- This paper analyses real income convergence in central, eastern and south-eastern Europe (CESEE) to the most advanced EU economies between 2000 and 2016. The relevance of this topic stems both from the far-reaching implications of real income convergence for economic welfare and the importance of convergence for economic and monetary integration with, and within the European Union. The paper establishes stylised facts of convergence, analyses the drivers of economic growth and identifies factors that might explain the differences between fast- and slow-converging economies in the region. The results show that the most successful CESEE economies in terms of the pace of convergence share common characteristics such as, inter alia, a strong improvement in institutional quality and human capital, more outward-oriented economic policies, favourable demographic developments and the quick reallocation of labour from agriculture into other sectors. Looking ahead, accelerating and sustaining convergence in the region will require further efforts to enhance institutional quality and innovation, reinvigorate investment, and address the adverse impact of population ageing.
- JEL Code:
- E01,F15,O11,O43,O47,O52,O57
- Network:
- N/A
- 13 July 2018
-
Discussion Paper Series - Issue No. 5Details
- Abstract:
- This paper investigates the costs and bene ts of liquidity regulation. We find that liquidity tools are beneficial but cannot completely remove the need for Lender of Last Resort (LOLR) interventions by the central bank. Full compliance with current Liquidity Coverage Ratio (LCR) and Net Stable Funding Ratio (NSFR) rules would have reduced banks' reliance on publicly provided liquidity during the global financial crisis without removing such assistance altogether. The paper also investigates the output costs of introducing the LCR and NSFR using two macrofinancial models. We find these costs to be modest.
- JEL Code:
- E44,E58,G21,G28
- 12 July 2018
-
Working Paper Series - Issue No. 2169Details
- Abstract:
- This paper investigates the costs and benefits of liquidity regulation. We find that liquidity tools are beneficial but cannot completely remove the need for Lender of Last Resort (LOLR) interventions by the central bank. Full compliance with current Liquidity Coverage Ratio (LCR) and Net Stable Funding Ratio (NSFR) rules would have reduced banks’ reliance on publicly provided liquidity during the global financial crisis without removing such assistance altogether. The paper also investigates the output costs of introducing the LCR and NSFR using two macro-financial models. We find these costs to be modest.
- JEL Code:
- E44,E58,G21,G28
- Network:
- Discussion papers
- 12 July 2018
-
Monetary policy account
- 11 July 2018
-
Research Bulletin - Issue No. 48Details
- Abstract:
- We present a euro area central stabilisation scheme that is relatively free from adverse incentives (moral hazard), because transfer payments to Member States are based on changes in world trade in the various economic sectors. Indeed, these changes are largely driven by external forces and therefore not directly controlled by individual governments or countries. The transfers generated by our scheme tend to be temporary, countercyclical and larger when economies are less diversified. Finally, the scheme is quite robust to revisions in the underlying export data.
- JEL Code:
- E32,E62,E63
- Network:
- N/A
- 11 July 2018
-
Press releaseAnnexes
- 11 July 2018
-
Other publicationDetails
- Network:
- N/A
- 11 July 2018
-
Euro area securities issues statistics
- 10 July 2018
-
Working Paper Series - Issue No. 2168Details
- Abstract:
- I extend the model of Laubach and Williams (2003) by introducing an explicit role for the financial cycle in the joint estimation of the natural rates of interest, unemployment and output, and the sustainable growth rate of the US economy. By incorporating the financial cycle – arguably an omitted variable from the system – the model is able to deliver more plausible estimates of business cycle dynamics. The sustained decline in the natural rate of interest in recent decades is confirmed, but I estimate that strong and persistent headwinds due to financial deleveraging have lowered temporarily the natural rate on average by around 1 p.p. below its long-run trend over 2008-14. This may have impaired the effectiveness of interest rate cuts to stimulate the economy and lift inflation back to target in the immediate aftermath of the GFC.
- JEL Code:
- C32,E43,E44,E52
- Network:
- N/A
- 10 July 2018
-
Working Paper Series - Issue No. 2167Details
- Abstract:
- The connection between the financial crisis and global imbalances is controversial. This paper argues that this relationship is likely to be connected to the existence of heterogenous financial frictions in different domestic credit markets. By developing a general equilibrium model where adverse selection and limited pledgeability coexist, this work highlights why adverse selection may play a pivotal role in determining the different (often opposing) welfare effects of international capital flows on originating and destination countries. This perspective also advances an analytical framework that is flexible enough to analyze the global effects on investment allocation of the ”Saving Glut”, of the policies facilitating financial integration and macro-prudential policy.
- JEL Code:
- D53,E2,F3
- Network:
- ECB Lamfalussy Fellowship Programme
- 10 July 2018
-
SpeechDetails
- Subtitle:
- Speech by Sabine Lautenschläger, Member of the Executive Board of the ECB and Vice-Chair of the Supervisory Board of the ECB, Ninth ECB Statistics Conference, "20 years of ESCB statistics: What's next?", Frankfurt, 10 July 2018
- 10 July 2018
-
Weekly financial statement - CommentaryAnnexes
- 10 July 2018
-
Weekly financial statement - Commentary
- 10 July 2018
-
Euro money market statistics
- 9 July 2018
-
InterviewDetails
- Subtitle:
- Interview with Benoît Cœuré, Member of the Executive Board of the ECB, conducted by Caroline Connan and broadcast on 9 July 2018
- 9 July 2018
-
SpeechDetails
- Subtitle:
- Introductory Statement by Mario Draghi, President of the ECB, at the ECON committee of the European Parliament, Brussels, 9 July 2018
Annexes- 10 July 2018
- 8 July 2018
-
SpeechDetails
- Subtitle:
- Panel remarks by Benoît Cœuré, Member of the Executive Board of the ECB, Les rencontres économiques d’Aix-en-Provence, 8 July 2018
- 5 July 2018
-
Legal Working Paper Series - Issue No. 17Details
- Abstract:
- This paper analyses regulatory solutions that have been adopted to address constitutional constraints imposed on the functioning of the Single Supervisory Mechanism (SSM), in which the ECB’s exclusive supervisory competence is carried out. It argues that the operational framework governing the functioning of the SSM has assimilated, to a certain extent, three specific regulatory solutions underpinning the workings of the ESCB/Eurosystem: 1) the (legislative) allocation of certain tasks and responsibilities between ECB internal administrative bodies and structures; 2) the possibility of internal delegation of decision-making powers; and 3) the decentralised exercise of certain of the Union’s tasks. Such a design of the SSM reflects institutional continuity concerning a political choice on how to achieve stage one of a genuine Economic and Monetary Union. It concludes that the Union operates at its best when centralised decision-making on substantial policy issues is combined with a decentralised operational framework allowing for the meaningful involvement of national administrations in the exercise of Union exclusive competences.
- JEL Code:
- K10,K40
- Network:
- N/A
- 5 July 2018
-
SpeechDetails
- Subtitle:
- Speech by Yves Mersch, Member of the Executive Board of the ECB, at the conference on “Economic and Monetary Union — Deepening and Convergence”, Linz, 5 July 2018
- 5 July 2018
-
SpeechDetails
- Subtitle:
- Keynote speech by Peter Praet, Member of the Executive Board of the ECB, at an event organised by the ECB’s Representative office in Brussels, 5 July 2018
Annexes- 5 July 2018
- 4 July 2018
-
Weekly financial statementAnnexes
- 4 July 2018
-
Weekly financial statement - Commentary
- 4 July 2018
-
Euro area economic and financial developments by institutional sector (early)
- 4 July 2018
-
Balance of payments (quarterly)
- 3 July 2018
-
SpeechDetails
- Subtitle:
- Keynote speech by Peter Praet, Member of the Executive Board of the ECB, at Banca Naţională a României, Bucharest, 3 July 2018
Annexes- 2 July 2018
- 3 July 2018
-
MFI interest rate statistics
- 2 July 2018
-
Working Paper Series - Issue No. 2166Details
- Abstract:
- We offer new evidence on the real effects of credit shocks in the presence of employment protection regulations by exploiting a unique provision in Spanish labor laws: dismissal rules are less stringent for Spanish firms with fewer than 50 employees, lowering the cost of hiring new workers. Using a new dataset, we find that during the financial crisis, healthy firms with fewer than 50 employees borrowing from troubled banks grew faster in sectors where capital and labor were sufficiently substitutable. This result does not obtain when we use a different cut-off for Spain or the same cut-off for firms in Germany. Our evidence suggests that labor market flexibility can dampen the negative effect of credit shocks by allowing firms to keep growing by substituting labor for capital.
- JEL Code:
- G21,J80,D20
- Network:
- N/A
- 1 July 2018
-
SpeechDetails
- Subtitle:
- Speech by Yves Mersch, Member of the Executive Board of the ECB, Panel at the Petersberger Sommerdialog, Königswinter, 30 June 2018
- 29 June 2018
-
Governing Council decisions - Other decisions
- 28 June 2018
-
Euro area quarterly financial accounts - Quality report
- 28 June 2018
-
Euro area balance of payments and international investment position statistics - Quality report
- 28 June 2018
- 28 June 2018
-
Economic Bulletin
- 28 June 2018
-
Economic Bulletin - BoxEconomic Bulletin Issue 4, 2018Details
- Abstract:
- On 23 May the European Commission issued its 2018 European Semester Spring Package of policy recommendations for Member States. The package includes country-specific recommendations (CSRs) for economic and fiscal policies for all EU Member States. It also covers recommendations regarding the implementation of the European Union's Stability and Growth Pact (SGP) for a number of countries. With regard to fiscal policies, the recommendations focus in particular on Member States' compliance with the SGP on the basis of the Commission's 2018 spring forecast and the Commission's assessment of countries' policy plans as reflected in the updates of the stability and convergence programmes released in April. This year's European Semester exercise is important particularly with a view to avoiding any repetition of mistakes made prior to the financial crisis when sufficient fiscal buffers were not built up in economic good times and the ensuing recession was aggravated by the sudden necessity of pro-cyclical fiscal tightening. Against this background, this box examines the fiscal policy recommendations that are addressed to 18 euro area countries (i.e. excluding Greece).
- JEL Code:
- H60,H68
- 28 June 2018
-
Economic Bulletin - BoxEconomic Bulletin Issue 4, 2018Details
- Abstract:
- Following very strong growth rates in 2017, quarterly real GDP growth in the euro area moderated to 0.4% in the first quarter of 2018. The slowdown in growth at the start of the year, which appears to reflect temporary factors as well as more lasting cyclical factors, was in line with developments in economic indicators, notably survey data. Both the composite output Purchasing Managers' Index (PMI) and the European Commission's Economic Sentiment Indicator (ESI) declined throughout the first quarter of 2018. However, it is important to note that, like output growth, these indicators fell back from exceptionally high levels.
- JEL Code:
- E32,E66
- 28 June 2018
-
Economic Bulletin - ArticleEconomic Bulletin Issue 4, 2018Details
- Abstract:
- Equity capital is among the main sources of funding for euro area non-financial corporations (NFCs), making it an important factor in the transmission of monetary policy. From a central bank perspective, improving the measurement and understanding of the cost of equity is therefore essential. Unlike the cost of debt, which has declined substantially in recent years, the cost of equity has remained relatively stable at elevated levels. Results from the analysis performed in this article suggest that a persistently high “equity risk premium” (ERP) has been the key factor underpinning the high cost of equity for euro area NFCs. In fact, since the start of the global financial crisis, increases in the ERP have largely offset the fall in the yield of risk-free assets. This article argues that the widely used workhorse model to derive the cost of equity and the ERP, namely the three-stage dividend discount model, can be improved upon. In particular, incorporating short-term earnings expectations, discounting payouts to investors with a discount factor with appropriate maturity, and considering share buy-backs all yield beneficial refinements. This in turn would strengthen the theory and basis of the model and improve the robustness of its estimates. Most notably, share buy-back activity seems to matter, specifically for the level of the ERP. Notwithstanding such improvements in the modelling approach, estimating the ERP, particularly its level, remains subject to considerable uncertainty. Ultimately, such uncertainty advocates the use of a variety of models and survey estimates, as well as a focus on the dynamics, rather than on the level, of the ERP. From an applied perspective, the article demonstrates that cost of equity modelling can be used to disentangle the different drivers of changes in equity prices. This is helpful from a monetary policy perspective, as changes in equity prices can contain important information about the economic outlook and warrant monitoring for financial stability purposes. Moreover, the article shows that adding an international perspective to the analysis of the ERP for the overall market may provide valuable insights for policymakers. For instance, the greater reliance on share buy-backs among companies in the United States than those in the euro area appears to be behind some of the recent steeper decline in the ERP in the United States when compared with the ERP in the euro area.
- JEL Code:
- E52,G12,G32,G35
- 28 June 2018
-
Economic Bulletin - BoxEconomic Bulletin Issue 4, 2018Details
- Abstract:
- This box describes the ECB's monetary policy operations during the first and second reserve maintenance periods of 2018, which ran from 31 January to 13 March 2018 and from 14 March to 2 May 2018 respectively. During this period the interest rates on the main refinancing operations (MROs), the marginal lending facility and the deposit facility remained unchanged at 0.00%, 0.25% and 0.40% respectively.
- JEL Code:
- E40,E52,E58
- 27 June 2018
- 27 June 2018
-
Monetary developments in the euro area
- 27 June 2018
-
Economic Bulletin - BoxEconomic Bulletin Issue 4, 2018Details
- Abstract:
- This box presents the main projection results of the 2018 Ageing Report for euro area countries. The 2018 Ageing Report, published on 25 May 2018, is the latest of the reports prepared every three years by the Ageing Working Group of the Economic Policy Committee. The report provides long-term projections of total public age-related costs and their components, which comprise pensions, health care, long-term care, education expenditure and unemployment benefits, for all EU countries over the period 2016 70. These projections are, of course, dependent on the underlying assumptions.
- JEL Code:
- H55,J11
- 27 June 2018
-
Economic Bulletin - BoxEconomic Bulletin Issue 4, 2018Details
- Abstract:
- Exchange rate developments can play an important role in shaping the outlook for HICP inflation. As a change in the exchange rate can affect consumer prices with considerable delays and as the impact can depend on the economic situation at the time, assessing the exchange rate pass-through requires constant monitoring. Between April 2017 and May 2018, the exchange rate of the euro appreciated by about 8% in nominal effective terms and by about 10% against the US dollar. This box briefly recalls how exchange rate changes are transmitted to consumer prices in the euro area. The box also looks at indicators at different stages of the pricing chain to gauge the degree of the pass-through at the current juncture. The focus is on the monitoring of the pass-through to exchange rate-sensitive components of the HICP excluding energy and food.
- JEL Code:
- C32,E31
- 26 June 2018
-
Weekly financial statementAnnexes
- 26 June 2018
-
Weekly financial statement - Commentary
- 26 June 2018
-
SpeechDetails
- Subtitle:
- Welcome remarks by Luis de Guindos, Vice-President of the ECB, at the meeting of the ECB’s Bond Market Contact Group, Frankfurt am Main, 26 June 2018
- 26 June 2018
-
Research Bulletin - Issue No. 47Details
- Abstract:
- In response to the global financial crisis the central banks of many advanced economies have adopted large-scale asset purchase programmes, with particular prominence given to purchases of sovereign debt. These programmes – often labelled as quantitative easing or QE – are intended to overcome the lower-bound constraint on short-term interest rates in an environment of persistently low inflation rates. This article offers a conceptual perspective on a number of design issues of QE that are specific to monetary unions. In general, design options for QE depend on the degree of institutional completeness of a monetary union. This is illustrated with findings from a stylised model of a monetary union which assumes an environment in which the central bank can always be assured that national fiscal policies are sustainable. Such setting is conducive to a particularly effective design of QE.
- JEL Code:
- E43,E52,E61,E63
- Network:
- N/A
- 26 June 2018
-
Economic Bulletin - ArticleEconomic Bulletin Issue 4, 2018Details
- Abstract:
- The relevance of foreign direct investment (FDI) as a source of economic activity has increased rapidly over the last decade. Between 2000 and 2016 the share of FDI stock in global GDP increased from 22% to 35%. Following a decline during the Great Recession, mergers and acquisitions (M&As), the most dynamic component of FDI, have recovered, reaching a record value of USD 1.2 trillion in the first quarter of 2018. The intensification of FDI activity has important implications for both origin and destination countries in terms of, for example, economic growth, productivity, wages and employment. Moreover, the expansion of multinational enterprises (MNEs) has been accompanied by the creation of complex cross-border production chains, which also has important implications. This article presents several findings regarding the main developments in and determinants of FDI over the past decade, at both global and EU level. Since the beginning of the 2000s there has been a gradual shift in the global FDI landscape, with emerging market economies (EMEs) gaining in prominence both as a source of and as a destination for such investment. EMEs have attracted a growing share of FDI flows, reaching more than 50% of the world’s total inward FDI in 2013. In addition, FDI flows are dominated by a relatively small number of M&As. In 2016 M&As with a value in excess of USD 1 billion accounted for only 1% of all FDI projects, but they generated 55% of total FDI flows. Moreover, evidence suggests that FDI and exports are not competing but complementary strategies for serving foreign markets. Finally, since 2008 EU countries are no longer the world’s main FDI investors and recipients. Nevertheless, econometric analysis shows that belonging to the EU dramatically boosts FDI flows in member countries.
- JEL Code:
- F21,F23
- 26 June 2018
-
SpeechDetails
- Subtitle:
- Speech by Benoît Cœuré, Member of the Executive Board of the ECB, at the Central Bank Payments Conference, Singapore, 26 June 2018
- 25 June 2018
-
InterviewDetails
- Subtitle:
- Interview with Benoît Cœuré, Member of the Executive Board of the ECB, conducted by Fabrice Nodé-Langlois and published on 25 June 2018
- 25 June 2018
-
Economic Bulletin - ArticleEconomic Bulletin Issue 4, 2018Details
- Abstract:
- Headline inflation can be noisy, blurring the signal on the medium-term inflationary pressure relevant for monetary policy. To help distinguish signal from noise in the data, central banks monitor measures of underlying inflation. As there are many ways of measuring underlying inflation, it is important to understand the properties of the various indicators and what factors may account for any divergence between them. This article describes in detail the measures of underlying inflation typically used at the ECB and evaluates them against a set of empirical criteria. Our results suggest that no one measure of underlying inflation is superior in all situations as the performance of the indicators varies over time. In practice, each indicator comes with merits and shortcomings, which calls for monitoring the full range of measures of underlying inflation.
- JEL Code:
- C52,C82,E31
- 24 June 2018
-
Working Paper Series - Issue No. 2165Details
- Abstract:
- Following the financial crisis, the share of non-performing loans has significantly increased, while the regulatory guidelines on the Internal-Ratings Based (IRB) approach for capital adequacy calculation related to defaulted exposures remains too general. As a result, the high-risk nature of these portfolios is clearly in danger of being managed in a heterogeneous and inappropriate manner by those financial institutions permitted to use the IRB system, with the consequent undue variability of Risk-Weighted Assets (RWA). This paper presents a proposal to construct Advanced IRB models for defaulted exposures, in line with current regulations, that preserve the risk sensitivity of capital requirements. To do so, both parameters Expected Loss Best Estimate (ELBE) and Loss Given Default (LGD) in-default are obtained, backed by an innovative indicator (Mixed Adjustment Indicator) that is introduced to ensure an appropriate estimation of expected and unexpected losses. The methodology presented has low complexity and is easily applied to the databases commonly used at these institutions, as illustrated by two examples.
- JEL Code:
- C51,G21,G28,G32
- Network:
- N/A
- 24 June 2018
-
Occasional Paper Series - Issue No. 211Details
- Abstract:
- This occasional paper reviews the macroeconomic developments in the euro area countries over the past 20 years. It analyses the accumulation of macroeconomic imbalances in the first decade of the EMU and their unwinding during the second decade. It shows that while flow imbalances have been corrected to a large extent, stock imbalances persist. The presence of large stock imbalances implies that the adjustment process needs to continue in the years to come. Accordingly, this paper reviews the national responses so far and the importance of well-functioning national economic structures for facilitating the adjustment process within the EMU. It shows that national structural policies are able to stimulate the supply side of the economy, increase adjustment capacity and mitigate the adverse growth effects of high debt and deleveraging. Finally, it gives an overview of the European response to address macroeconomic imbalances, i.e. the establishment of the Macroeconomic Imbalance Procedure (MIP). The MIP has contributed to increasing the general attention given to macroeconomic imbalances in the euro area and to the critical role that structural reforms play in facilitating their adjustment. Looking forward, further steps would appear to be warranted in order to move from greater awareness towards stronger ownership and implementation of reforms.
- JEL Code:
- E02,F45,O52
- Network:
- N/A
- 23 June 2018
-
InterviewDetails
- Subtitle:
- Interview with Peter Praet, Member of the Executive Board of the ECB, conducted by João Silvestre on 18 June 2018 and published on 23 June 2018
- 21 June 2018
-
Occasional Paper Series - Issue No. 210Details
- Abstract:
- Structural policies in the euro area are of great interest for the Eurosystem, particularly as they can support the smooth functioning of the Economic and Monetary Union (EMU) and the effectiveness of monetary policy. This paper adopts a broad definition of structural policies, analysing not only the benefits of efficient labour, product and financial market regulations, but also emphasising the importance of good governance and efficient institutions that ensure high quality and impartial public services, the rule of law and the control of rent-seeking. The paper concludes that there are many opportunities for enhanced structural policies in EU and euro area countries which can yield substantial gains by boosting long-term income and employment growth and supporting social fairness, also via better and more equal opportunities. It provides empirical and model-based analyses on the impacts and the interactions of structural policies, highlighting synergies between growth and inclusiveness, while acknowledging that structural policy changes need to be country-specific to reflect national conditions and social preferences. Welldesigned structural policies would also strengthen economic resilience and convergence of Member States, bringing the euro area closer to the requirements of an optimal currency area and improving the transmission of monetary policy. The paper also discusses the political economy causes of the sluggish implementation of socially beneficial structural policies and assesses ways to deal with possible shortterm costs of reforms.
- JEL Code:
- D60,E24,G28,H11,J08,O47,O43
- Network:
- N/A
- 21 June 2018
- 20 June 2018
-
Working Paper Series - Issue No. 2164Details
- Abstract:
- We consider a standard result of customer market theory: if firms have stable customer relations and face financial frictions, they may keep prices relatively high on their locked-in shoppers to maintain short-term profits at the expense of future market shares in times of low demand and vice versa in times of high demand. We extend this theoretical framework so that the countercyclical behaviour of price margins is strengthened by the expected persistence of demand and the procyclicality of competitive pressures. We test these predictions for Italian firms participating in the 2014 Wage Dynamics Network Survey. All things being equal, financially constrained firms charge higher markups when faced with low demand; this behaviour is more evident when demand is perceived as being persistent. Our findings suggest that the severity of financial constraints in Italy was one of the causes of the sustained growth of prices in 2010-2013.
- JEL Code:
- C25,C26,D22,L11
- Network:
- Wage dynamics network
- 20 June 2018
-
Working Paper Series - Issue No. 2163Details
- Abstract:
- Macroeconomic aggregates on households’ wealth have a long tradition and are widely used to analyse and compare economies, yet they do not provide any information about the distribution of assets and liabilities within the population. The Household Finance and Consumption Survey (HFCS) constitutes a rich source of micro data that can be used to link macro aggregates with distributional information to compile Distributional National Accounts for wealth. Computing aggregates from this survey usually yields much lower amounts than what is reported by macroeconomic statistics. An important source of this gap may be the lack of the wealthiest households in the HFCS. This article combines a semi-parametric Pareto model estimated from survey data and observations from rich lists with a stratification approach making use of HFCS portfolio structures to quantify the impact of the missing wealthy households on instrument-specific gaps between micro and macro data. We analyse data for Austria and Germany, and find that adjusting for the missing wealthy pushes up inequality even further, increases instrument-specific aggregates, has large effects on equity, but explains less than ten percentage points of the micro-macro gap for most other instruments. Additionally, we document that some countries’ lack of an oversampling strategy for wealthy households limits the cross-country comparability of wealth inequality statistics.
- JEL Code:
- D31,E01
- Network:
- Household Finance and Consumption Network (HFCN)
- 19 June 2018
-
Working Paper Series - Issue No. 2162Details
- Abstract:
- Governments often issue bonds in foreign jurisdictions, which can provide additional legal protection vis-à-vis domestic bonds. This paper studies the effect of this jurisdiction choice on a bond prices. We test whether foreign-law bonds trade at a premium compared to domestic-law bonds. We use the euro area 2006-2013 as a unique testing ground, controlling for currency risk, liquidity risk, and term structure. Foreign-law bonds indeed carry significantly lower yields in distress periods, and this effect rises as the risk of a sovereign default increases. These results indicate that, in times of crisis, governments can borrow at lower rates under foreign law.
- JEL Code:
- F34,G12,K22
- Network:
- N/A
- 19 June 2018
-
Working Paper Series - Issue No. 2161Details
- Abstract:
- Standard economic intuition suggests that asset prices are more sensitive to news than other economic aggregates. This has led many researchers to conclude that asset price data would be very useful for the estimation of business cycle models containing news shocks. This paper shows how to formally evaluate the information content of observed variables with respect to unobserved shocks in structural macroeconomic models. The proposed methodology is applied to two different real business cycle models with news shocks. The contribution of asset prices is found to be relatively small. The methodology is general and can be used to measure the informational importance of observables with respect to latent variables in DSGE models. Thus, it provides a framework for systematic treatment of such issues, which are usually discussed in an informal manner in the literature.
- JEL Code:
- C32,C51,C52,E32
- Network:
- N/A
- 19 June 2018
- 19 June 2018
-
Weekly financial statementAnnexes
- 19 June 2018
-
Weekly financial statement - Commentary
- 19 June 2018
-
SpeechDetails
- Subtitle:
- Speech by Mario Draghi, President of the ECB, ECB Forum on Central Banking, Sintra, 19 June 2018
- 19 June 2018
-
Balance of payments (monthly)
- 18 June 2018
-
Working Paper Series - Issue No. 2160Details
- Abstract:
- This paper uses data on bilateral foreign exposures of domestic banking systems in order to construct early warning models for financial crises that take into account cross-country spill-overs of vulnerabilities. The empirical results show that incorporating cross-country financial linkages can improve the signalling performance of early warning models. The relative usefulness increases from 65% to 87% and the AUROC from 0.89 to 0.97 when weighted foreign variables are added to domestic variables in a multivariate logit early warning model. The findings of the paper also suggest that global variables still play a role in predicting financial crises, even when foreign variables are controlled for, which could suggest that both cross-country spill-overs and contagion are important factors for driving financial crises. A parsimonious model with nine variables that combines domestic, foreign and global variables yields an out-of-sample relative usefulness of 0.82 with Type I and Type II errors of 0.11 and 0.07.
- JEL Code:
- G01,G17,F37,F65
- Network:
- N/A
- 18 June 2018
-
Working Paper Series - Issue No. 2159Details
- Abstract:
- This paper studies the recent trends in nominal wage rigidity in a large group of EU countries, using survey data. We analyse two forms of nominal wage rigidity: downward nominal wage rigidity (DNWR) and the lagged response of wages to shocks. The frequency of wage changes, which is an indicator of lagged wage setting, slowed down in the aftermath of the Great Recession. We assess the possible reasons for this and show that it was at least partially caused by a combination of a decline in average wage growth and persistent DNWR. In countries where wage growth slowed down more after the Great Recession, the frequency of wage changes declined more steeply as well. Our data allows evaluating the prevalence of DNWR in diverse economic circumstances. Like earlier research on this topic, we find that DNWR tends to be strongly prevalent, even in periods of slow economic growth and low wage inflation. DNWR declines during severe recessions but even then wage setting does not become completely flexible as the proportion of observed wage cuts is still below the level that would correspond to a flexible regime.
- JEL Code:
- B41,D22
- Network:
- Wage dynamics network
- 15 June 2018
-
InterviewDetails
- Subtitle:
- Interview with Benoît Cœuré, Member of the Executive Board of the ECB, conducted by Patrick Cohen on 15 June 2018 and broadcast on 15 June 2018
- 15 June 2018
- 15 June 2018
-
SpeechDetails
- Subtitle:
- Speech by Benoît Cœuré, Member of the Executive Board of the ECB, at the at the Club des Trente's "Chief Investment Officer - Chief Financial Officer" conference, Paris, 15 June 2018
- 15 June 2018
- 15 June 2018
-
Other publicationDetails
- Network:
- N/A
- 15 June 2018
- 15 June 2018
- 15 June 2018
- 15 June 2018
- 14 June 2018
-
Working Paper Series - Issue No. 2158Details
- Abstract:
- This paper provides evidence on the role of non-base wage components as a channel for firms to adjust labour costs in the event of adverse shocks. It uses data from a firm-level survey for 25 European countries that covers the period 2010–2013. We find that firms subject to nominal wage rigidities, which prevent them from adjusting base wages, are more likely to cut non-base wage components in order to adjust labour costs when needed. Firms thus use non-base wage components as a buffer to overcome base wage rigidity. We further show that while nonbase wage components exhibit some degree of downward rigidity, they do so to a lesser extent than base wages.
- JEL Code:
- J30,J32,C81,P5
- Network:
- Wage dynamics network
- 14 June 2018
-
Working Paper Series - Issue No. 2157Details
- Abstract:
- How sizable is the wealth effect on consumption in euro area countries? To address this question, we use newly available harmonized euro area wealth data and the methodology in Carroll et al. (2011b). We find that the marginal propensity to consume out of total wealth averaged across the largest euro area economies is around 3 cents per euro, with a marginal propensity to consume out of financial wealth significantly larger than of housing wealth. Country-group estimates document no significant differences between the largest economies and the rest of the sample. In contrast, remarkable differences emerge between periphery and core countries.
- JEL Code:
- C22,E21,E32,E44
- Network:
- Research Task Force (RTF)
- 14 June 2018
-
Macroeconomic projections for the euro areaAnnexes
- 14 June 2018
- 28 June 2018
-
Macroeconomic projections for the euro area
- 14 June 2018
-
Monetary policy statement
- 14 June 2018
-
Monetary policy decision
- 12 June 2018
-
Weekly financial statementAnnexes
- 12 June 2018
-
Weekly financial statement - Commentary
- 12 June 2018
-
Euro area insurance corporations statistics
- 12 June 2018
-
Euro area securities issues statistics
- 8 June 2018
-
SpeechDetails
- Subtitle:
- Speech by Yves Mersch, Member of the Executive Board of the ECB, at the International Risk Management Conference, Paris, 8 June 2018
- 6 June 2018
-
SpeechDetails
- Subtitle:
- Speech by Peter Praet, Member of the Executive Board of the ECB, at the Congress of Actuaries, Berlin, 6 June 2018
Annexes- 6 June 2018
- 5 June 2018
-
The international role of the euro
- 5 June 2018
-
Weekly financial statementAnnexes
- 5 June 2018
-
Weekly financial statement - Commentary
- 4 June 2018
-
Working Paper Series - Issue No. 2156Details
- Abstract:
- This paper develops a tractable model of a monetary union with a sound fiscal governance structure and shows how in such environment the design of monetary policy above and at the lower bound constraint on short-term interest rates can be linked to well-known findings from the literature dealing with single closed economies. The model adds a portfolio balance channel to a New Keynesian two-country model of a monetary union. If the monetary union is symmetric and the portfolio balance channel is not active, the model becomes isomorphic to the canonical New Keynesian three-equation economy in which central bank purchases of long-term debt (QE) at the lower bound are ineffective. If the portfolio balance channel is active, QE becomes effective and we prove that for sufficiently small shocks there exists an interest rate rule augmented by QE at the lower bound which replicates the equilibrium allocation and the welfare level of a hypothetically unconstrained economy. Shocks large enough to push the whole yield curve to the lower bound require, in addition, forward guidance. We generalise these results to an asymmetric monetary union and illustrate them through simulations, distinguishing between asymmetric shocks and asymmetric structures. In general, asymmetries give rise to current account imbalances which are, depending on the degree of financial integration, funded by private capital imports or through the central bank balance sheet channel. Moreover, our findings support that at the lower bound, as long as asymmetries between countries result from shocks, outcomes under an unconstrained policy rule can be replicated via a symmetric QE design. By contrast, asymmetric structures of the countries which matter for the transmission of monetary policy can translate into an asymmetric QE design.
- JEL Code:
- E43,E52,E61,E63
- Network:
- N/A
- 4 June 2018
-
Working Paper Series - Issue No. 2155Details
- Abstract:
- How to conduct macro-prudential regulation? How to coordinate monetary policy and macro-prudential policy? To address these questions, I develop a continuous-time New Keynesian economy in which a financial intermediary sector is subject to a leverage constraint. Coordination between monetary and macro-prudential policies helps to reduce the risk of entering into a financial crisis and speeds up exit from the crisis. The downside of coordination is variability in inflation and in the employment gap.
- JEL Code:
- E31,E32,E44,E52,E61,G01
- Network:
- Research Task Force (RTF)
- 4 June 2018
-
Survey on the Access to Finance of Enterprises in the euro area - Issue No. 2017Annexes
- 3 June 2018
-
SAFE questionnaire
Related - 4 June 2018
-
Press releaseRelated
- 4 June 2018
-
Survey on the Access to Finance of Enterprises in the euro area - Issue No. 2017
- 4 June 2018
-
MFI interest rate statistics
- 29 May 2018
-
Working Paper Series - Issue No. 2154Details
- Abstract:
- Identifying fiscal multipliers is usually constrained by the absence of a counterfactual scenario. Our new data set allows overcoming this problem by making use of the fact that recommendations under the EU’s excessive deficit procedure (EDP) provide both a baseline no-policy-change scenario and a fiscal-adjustment EDP scenario that entails a forecast of the macroeconomic impact of fiscal consolidation over the EDP horizon. For a sample of 24 EU countries to which 48 EDP recommendations were applied between 2009 and 2015, we derive country-specific fiscal multipliers as actually applied by forecasters during the crisis. Our results confirm Blanchard and Leigh’s (2013, 2014) presumption that forecasters learned during the crisis. According to our findings, fiscal multipliers as applied by the European Commission increased over time – from about 1/4 in the early years of the crisis to about 2/3 in the later years. However, different from Blanchard and Leigh (2013, 2014), we do not find evidence for the hypothesis that ex-post fiscal multipliers have been substantially above 1 during the crisis.
- JEL Code:
- E32,E62,H20,H5
- Network:
- N/A
- 29 May 2018
-
Other publication - Issue No. 2018Details
- Network:
- N/A
- 29 May 2018
-
SpeechDetails
- Subtitle:
- Speech by Sabine Lautenschläger, Member of the Executive Board of the ECB and Vice-Chair of the Supervisory Board of the ECB, Center for Financial Studies Colloquium, Frankfurt, 29 May 2018
- 29 May 2018
-
InterviewDetails
- Subtitle:
- Interview with Vítor Constâncio, Vice-President of the ECB, conducted by Stefan Kaiser and Henning Jauernig on 22 May 2018 and published on 29 May 2018
- 29 May 2018
-
Weekly financial statementAnnexes
- 29 May 2018
-
Weekly financial statement - Commentary
- 29 May 2018
-
SpeechDetails
- Subtitle:
- Keynote speech by Yves Mersch, Member of the Executive Board of the ECB, at the Frankfurt Finance Summit, Frankfurt, 29 May 2018
- 29 May 2018
-
Monetary developments in the euro area
- 25 May 2018
-
SpeechDetails
- Subtitle:
- Panel remarks by Benoît Cœuré, Member of the Executive Board of the ECB, at a conference on the occasion of Sveriges Riksbank’s 350th anniversary, Stockholm, 25 May 2018
- 24 May 2018
-
Working Paper Series - Issue No. 2153Details
- Abstract:
- This paper assesses the relative importance of perceived obstacles to hiring workers on a permanent basis faced by EU firms and studies how they depend on firm’s characteristics. Findings suggest that the main obstacles to hiring in Europe are high uncertainty, shortage of skilled labour, high payroll taxes, high wages and the risks associated with changes to labour laws. While negative (firm-level) demand and finance shocks negatively affect firms’ perceptions of obstacles to hiring, labour market structures and firms’/employees’ characteristics are also found significant. In particular, our analysis shows that firms employing a higher percentage of skilled, permanent and experienced workers report fewer hiring obstacles. In contrast, firms under collective wage bargaining arrangements seem to report these obstacles more often. However, there are also some specific obstacles to hiring where this is not the case, which suggests that firm-level characteristics should also be taken into account when designing labour market policies. Finally, our analysis provides further tentative evidence on the impacts of labour market reforms, which seem to have a potential to address impediments towards employment creation in the EU.
- JEL Code:
- D22,J21,J24,J63
- Network:
- Wage dynamics network
- 24 May 2018
-
Working Paper Series - Issue No. 2152Details
- Abstract:
- Macroeconomic models often invoke consumption "habits" to explain the substantial persistence of macroeconomic consumption growth. to explain the substantial But a large literature has found no evidence of habits in the micro-economic datasets that measure the behavior of individual households. We show that the apparent conflict can be explained by a model in which consumers have accurate knowledge of their personal circumstances but `sticky expectations' about the macro-economy. In our model, the persistence of aggregate consumption growth reflects consumers' imperfect attention to aggregate shocks. Our proposed degree of (macro) inattention has negligible utility costs, because aggregate shocks constitute only a tiny proportion of the uncertainty that consumers face.
- JEL Code:
- D83,D84,E21,E32
- Network:
- N/A
- 24 May 2018
-
Monetary policy account
- 24 May 2018
-
Financial Stability Review - ArticleFinancial Stability Review Issue 1, 2018Details
- Abstract:
- The real economy repercussions of financial crises are the ultimate focus of financial stability monitoring and policymakers. By extending a standard set of financial stability indicators with indicators capturing spillover and contagion risks, this special feature proposes a financial stability risk index (FSRI) that has predictive power for the near-term risk of deep recessions. It is shown that the empirical performance of the index benefits from combining a large set of macro-financial indicators and, notably, that the information content of the spillover and contagion risk indicators is important.
- JEL Code:
- G00
- 24 May 2018
-
Financial Stability Review - ArticleFinancial Stability Review Issue 1, 2018Details
- Abstract:
- This special feature presents a tractable, transparent and broad-based cyclical systemic risk indicator (CSRI) that captures risks stemming from domestic credit, real estate markets, asset prices, external imbalances and cross-country spillovers. The CSRI increases on average several years before the onset of systemic financial crises and its level is highly correlated with measures of crisis severity. Model estimates suggest that high values of the CSRI contain information about large declines in real GDP growth three to four years down the road, as it precedes shifts in the entire distribution of future real GDP growth and especially of its left tail. Given its timely signals, the CSRI is a useful analytical tool for macroprudential policymakers to complement other existing analytical tools.
- JEL Code:
- G00
- 24 May 2018
- 24 May 2018
-
Euro area investment fund statistics
- 24 May 2018
-
Financial Stability Review
- 24 May 2018
-
Euro area financial vehicle corporation statistics
- 24 May 2018
-
Financial Stability Review - ArticleFinancial Stability Review Issue 1, 2018Details
- Abstract:
- This special feature analyses the distribution of interest rate risk in the euro area economy using balance sheet data and information on derivatives positions from significant credit institutions. On aggregate, banks’ interest rate risk exposure is small relative to their loss absorption capacity, but exposure varies across institutions. This variation is driven by loan rate fixation practices at country level. Banks use derivatives for hedging, but retain residual interest rate risk exposures. In fixed-rate countries the main vulnerability to rising interest rates lies with the banks that have the greatest interest rate risk, while households would be directly affected in countries with predominantly variable-rate loans. In the latter case, increased loan servicing costs due to rising interest rates could affect banks through lower asset quality.
- JEL Code:
- G00
- 23 May 2018
-
InterviewDetails
- Subtitle:
- Interview with Benoît Cœuré, Member of the Executive Board of the ECB, conducted by Lisa Nienhaus and Mark Schieritz on 16 May 2018 and published on 23 May 2018
- 23 May 2018
- 23 May 2018
-
Convergence Report - Issue No. 2018
- 23 May 2018
-
Press release
- 23 May 2018
-
Euro money market statistics
- 22 May 2018
-
Statistics Paper Series - Issue No. 28Details
- Abstract:
- This paper presents a detailed set of new, quantity-based indicators of financial integration in the euro area. The indicators are based on granular data from securities holdings statistics and help us disentangle the main drivers of the portfolio changes observed since the financial crisis. Three key developments since the crisis stand out. First, we find that financial integration in equity is less than that in the debt market, although the equity market was the main contributor to the partial recovery in financial integration observed since mid-2012. Second, we observe a gradual shift in cross-border investment activity from the banking sector towards other non-bank financial entities. In particular, our results show that euro area banks significantly decreased their investment in debt securities issued by banks in other euro area countries and that this decrease explains around 55% of the decline in financial integration in the debt market observed since the crisis. Finally, we find that the sharp decrease in financial integration between 2009 and 2012 was mainly driven by foreign investor flight from government debt securities, a trend that has since reversed.
- JEL Code:
- F36,G1,G10,G15
- Network:
- N/A
- 22 May 2018
-
Weekly financial statementAnnexes
- 22 May 2018
-
Weekly financial statement - Commentary
- 21 May 2018
-
Working Paper Series - Issue No. 2151Details
- Abstract:
- This paper shows that there are two regularities in foreign exchange markets in advanced countries with flexible regimes. First, real exchange rates are mean-reverting, as implied by the Purchasing Power Parity model. Second, the adjustment takes place via nominal exchange rates. These features of the data can be exploited, even on the back of a napkin, to generate nominal exchange rate forecasts that outperform the random walk. The secret is to avoid estimating the pace of mean reversion and assume that relative prices are unchanged. Direct forecasting or panel data techniques are better than the random walk but fail to beat this simple calibrated model.
- JEL Code:
- C32,F31,F37,F41
- Network:
- N/A
- 21 May 2018
-
Working Paper Series - Issue No. 2150Details
- Abstract:
- This study augments the neoclassical growth model with a mechanism that creates a novel transmission channel through which financial shocks propagate to the real economy. By affecting agents’ ability to finance consumption expenditures, financial frictions create a demand for safe assets that exposes the economy to asset quality shocks. My main finding is that this mechanism provides a potential explanation for the co-movement observed during the 2007-2009 financial crisis in the eurozone. My results also suggest that these shocks are a plausible source of aggregate risk that could explain business cycle fluctuations as well as standard asset pricing puzzles. Finally, introducing this transmission mechanism into the neoclassical growth model increases the welfare cost of business cycle fluctuations by several orders of magnitude.
- JEL Code:
- E32,E44,G10
- Network:
- N/A
- 18 May 2018
- 18 May 2018
-
InterviewDetails
- Subtitle:
- Interview with Vítor Constâncio, Vice-President of the ECB, conducted by Paul Gordon on 17 May 2018
- 18 May 2018
-
Governing Council decisions - Other decisions
- 18 May 2018
-
Balance of payments (monthly)
- 17 May 2018
-
SpeechDetails
- Subtitle:
- Remarks by Vítor Constâncio, Vice-President of the ECB, at the ECB Colloquium on “The Future of Central Banking”, Frankfurt am Main 16-17 May 2018
- 16 May 2018
-
Research Bulletin - Issue No. 46Details
- Abstract:
- The dispersion of prices between Member States of the European Union (EU) is a popular indicator of the economic integration of the internal market. Car prices in the EU converged from the 1990s until the year 2003, after which this development ceased. The remaining price dispersion between countries is systematically linked to product features, reflecting manufacturer pricing-to-market.
- JEL Code:
- F15,F31,L11,L62,D22
- Network:
- N/A
- 16 May 2018
-
InterviewDetails
- Subtitle:
- Interview with Vítor Constâncio, Vice-President of the ECB, conducted by Claire Jones on 11 May and published on 16 May 2018
- 15 May 2018
-
Weekly financial statementAnnexes
- 15 May 2018
-
Weekly financial statement - Commentary
- 15 May 2018
-
Euro area securities issues statistics
- 14 May 2018
-
SpeechDetails
- Subtitle:
- Speech by Benoît Cœuré, Member of the Executive Board of the ECB, at the International Center for Monetary and Banking Studies, Geneva, 14 May 2018
- 14 May 2018
-
SpeechDetails
- Subtitle:
- Speech by Sabine Lautenschläger, Member of the Executive Board of the ECB and Vice-Chair of the Supervisory Board of the ECB, Biannual high-level networking seminar on economic and financial issues organised by Danmarks Nationalbank, Copenhagen, 14 May 2018
- 14 May 2018
-
SpeechDetails
- Subtitle:
- Speech by Peter Praet, Member of the Executive Board of the ECB, at the MNI Connect Roundtable, London, 14 May 2018
- 14 May 2018
-
SpeechDetails
- Subtitle:
- Speech by Sabine Lautenschläger, Member of the Executive Board of the ECB and Vice-Chair of the Supervisory Board of the ECB, Meeting with students at Copenhagen University, Copenhagen, 14 May 2018
- 14 May 2018
-
SpeechDetails
- Subtitle:
- Speech by Yves Mersch, Member of the Executive Board of the ECB, at the 39th meeting of the Governor’s Club Bodrum, Turkey,14 May 2018
- 11 May 2018
-
SpeechDetails
- Subtitle:
- Speech by Mario Draghi, President of the ECB, at the European University Institute, Florence, 11 May 2018
- 10 May 2018
-
Economic Bulletin - Article - Issue No. 3Economic Bulletin Issue 3, 2018Details
- Abstract:
- This article establishes stylised facts about convergence and analyses the sources of economic growth in central, eastern and south-eastern European (CESEE) economies within and outside the European Union (EU).22 It also compares the performance across countries and identifies the challenges that these economies face on the way to further advancing convergence. Although all CESEE economies have converged towards the most advanced EU economies since 2000, progress has been heterogeneous. While some countries have experienced fast economic growth and a speedy catching-up, for others the catching-up process has been rather slow. Economic convergence has been much faster in the CESEE countries that became members of the EU (including those which later joined the euro area) than in the Western Balkan countries that are currently EU candidates or potential candidates. Convergence was particularly rapid before the global financial crisis, but slowed down thereafter. The article identifies several factors that are common to the most successful countries in the region in terms of the pace of convergence since 2000. These include (inter alia) improvements in institutional quality, external competitiveness and innovation, increases in trade openness, high or improving levels of human capital, and relatively high investment rates. Looking ahead, accelerating and sustaining convergence in the region will require further efforts to enhance institutional quality and innovation, reinvigorate investment, and address the adverse impact of population ageing. For EU candidates and potential candidates, EU accession prospects might constitute an anchor for reform momentum – in particular, but not exclusively, in the key area of enhancing institutional quality – and thus support the long-term growth prospects and real convergence of these countries.
- JEL Code:
- E01,F15,O11,O43,O47
- Network:
- N/A
- 10 May 2018
-
Economic Bulletin - Article - Issue No. 3Economic Bulletin Issue 3, 2018Details
- Abstract:
- This article discusses the concept of risk sharing, which generally refers to the notion that economic agents, such as households and firms, attempt to insure their consumption streams against fluctuations in the business cycle of their country, i.e. they try to “smooth out” changes in their consumption resulting from economic shocks. The article then considers what proportion of an economic shock in the euro area can be smoothed, and compares this with the situation in the United States. While a comparison of the degree of risk sharing between the euro area and the United States needs to be seen against the background of different institutional and political architectures, it nevertheless offers potentially interesting economic insights. The article shows that, while in the euro area around 80% of a shock to GDP growth in a given country remained unsmoothed over the period 1999-2016, thus resulting in sizeable differences in consumption growth across countries, in the United States at most 40% of a shock to state-specific GDP was unsmoothed over the same period. The article also evaluates the relative importance of the main risk sharing channels, i.e. the credit, capital and fiscal channels, as well as the role of European institutions. It shows that, in the euro area, risk sharing takes place mainly via the capital channel, i.e. through cross-border holdings of financial assets. Finally, the article puts the empirical results into the perspective of the ongoing debate on enhancing the institutional architecture of Economic and Monetary Union (EMU). It calls for euro area countries to make their economies, banking sectors and public finances less vulnerable to macroeconomic shocks. The article explains how efficient and integrated financial markets are a core prerequisite for effective private risk sharing in the euro area. It also shows how the euro area would benefit from a central fiscal stabilisation function to support national economic stabilisers in the presence of large economic shocks and thereby make EMU more resilient.
- JEL Code:
- E21,E62,F15,F36
- Network:
- N/A
- 10 May 2018
-
Economic Bulletin - Box - Issue No. 3Economic Bulletin Issue 3, 2018Details
- Abstract:
- The euro area's international investment position (i.i.p.) improved further in 2017. The recent improvement in the euro area's net i.i.p. was mainly driven by net financial transactions – reflecting the euro area’s current account surplus – and developments in asset prices. As regards financial instruments, the improvement in the euro area's net i.i.p. was mainly due to a shift in portfolio debt securities from a net liability to a net asset position.
- JEL Code:
- F21,F32,F42
- Network:
- N/A
- 10 May 2018
-
Economic Bulletin - Box - Issue No. 3Economic Bulletin Issue 3, 2018Details
- Abstract:
- This box aims to illustrate the difficulties in measuring slack in the euro area economy and the high uncertainty surrounding the estimates. A model-based estimate illustrates the point by suggesting an output gap that is close to zero, although surrounded by a high degree of uncertainty. Recent labour supply shocks are likely to be supporting the growth of both potential and actual output. The broad measure of labour underutilisation suggests that slack was larger during the financial crisis and over the recovery than indicated by the headline unemployment rate.
- JEL Code:
- E22,E23,E32,J20,J64
- Network:
- N/A
- 10 May 2018
-
Economic Bulletin
- 8 May 2018
-
Weekly financial statementAnnexes
- 8 May 2018
-
Weekly financial statement - Commentary
- 8 May 2018
- 8 May 2018
-
Economic Bulletin - Article - Issue No. 3Economic Bulletin Issue 3, 2018Details
- Abstract:
- This article reviews the impact of the ECB’s corporate sector purchase programme (CSPP) on corporate bond markets and the financing of euro area non-financial corporations (NFCs). It finds that the CSPP has led to a significant easing in financing conditions for euro area NFCs, including declines in corporate bond spreads, improved supply conditions in the corporate bond primary market and increased bank lending to NFCs that do not have access to bond-based financing. The operational set-up of the CSPP, in particular its flexibility and adaptability, minimises any impact that could be detrimental to the functioning of the corporate bond market.
- JEL Code:
- E52,E58,G01,G12,G21
- Network:
- N/A
- 8 May 2018
-
TARGET Annual Report
- 7 May 2018
-
SpeechDetails
- Subtitle:
- Speech by Peter Praet, Member of the Executive Board of the ECB, at the Swiss Financial Analysts Association (SFAA), Geneva, 7 May 2018
Annexes- 6 May 2018
- 7 May 2018
-
Economic Bulletin - Box - Issue No. 3Economic Bulletin Issue 3, 2018Details
- Abstract:
- Public support for globalisation has declined over the past decade and trade reforms have slowed. Moreover, in recent weeks the risk of rising trade tensions has surged on the back of new sets of tariffs announced by the US administration. This box discusses the possible implications of rising trade tensions for the global economy.
- JEL Code:
- F62,F13
- Network:
- N/A
- 4 May 2018
-
MFI interest rate statistics
- 4 May 2018
-
SpeechDetails
- Subtitle:
- Speech by Vítor Constâncio, Vice-President of the ECB, at the Conference on “Central Banks in Historical Perspective: What Changed After the Financial Crisis?”, organised by the Central Bank of Malta, Valletta, 4 May 2018
- 3 May 2018
-
SpeechDetails
- Subtitle:
- Keynote speech by Vítor Constâncio, Vice-President of the ECB, at the joint conference of the European Commission and European Central Bank, Frankfurt am Main, 3 May 2018
- 3 May 2018
-
SpeechDetails
- Subtitle:
- Speech by Peter Praet, Member of the Executive Board of the ECB, at the OECD Chief Economist Talks, Paris, 3 May 2018
Annexes- 3 May 2018
- 3 May 2018
-
Financial integration and structure in the euro area - Issue No. 2018
- 3 May 2018
-
Press release
- 2 May 2018
-
Weekly financial statementAnnexes
- 2 May 2018
-
Weekly financial statement - Commentary
- 2 May 2018
- 2 May 2018
- 2 May 2018
-
Working Paper Series - Issue No. 2149Details
- Abstract:
- Traditional carry trade strategies are based on differences in short-term interest rates, neglecting any other information embedded in yield curves. We derive return distributions of carry trade portfolios among G10 currencies, where the signals to buy and sell currencies are based on summary measures of the yield curve, the Nelson-Siegel factors. We find that a strategy based on the relative curvature factor, the curvy trade, yields higher Sharpe ratios and a smaller return skewness than traditional carry trade strategies. Curvy trades build less upon the typical carry currencies, like the Japanese yen and the Swiss franc, and are hence less susceptible to crash risk. In line with that, standard pricing factors of traditional carry trade returns, such as exchange rate volatility, fail to explain curvy trade returns in a linear asset pricing framework. Our findings are in line with recent interpretations of the curvature factor. A relatively high curvature signals a relatively higher path of future short-term rates over the medium-term putting upward pressure on the currency.
- JEL Code:
- C23,C53,G11
- Network:
- N/A
- 2 May 2018
-
Working Paper Series - Issue No. 2148Details
- Abstract:
- This paper investigates the contribution of private and public channels for consumption risk sharing in the EMU over the period 1999-2015. In particular, we explore the role of financial integration versus international financial assistance for private consumption smoothing in this set of countries. In addition, we present a time-varying test which allows estimating how risk sharing has evolved since the start of the EMU, and in particular during the recent crisis. Our results suggest that, whereas in the early years of the EMU only about 40% of country-specific output shocks were smoothed, in the aftermath of the euro zone’s sovereign debt crisis about 65% of these shocks were absorbed, therefore reducing consumption growth differentials across countries. This progressive improvement of the shock-absorption capacity is due to a higher financial integration, but also to the activation of the European Financial Stability Facility (EFSF) and the European Stability Mechanism (ESM) channelling official loans to distressed euro zone economies. We also show that cross-border holdings of equities and debt seem to be more effective than cross-border bank loans in isolating households from country-specific shocks, therefore contributing to consumption smoothing.
- JEL Code:
- C23,E62,G11,G15
- Network:
- N/A
- 1 May 2018
-
T2S financial statement
- 30 April 2018
-
Occasional Paper Series - Issue No. 209Details
- Abstract:
- This paper provides a comprehensive overview of the use of the Eurosystem’s monetary policy instruments and the operational framework from the second quarter of 2016 to the last quarter of 2017. It reviews the context of Eurosystem market operations; the design and operation of the Eurosystem’s counterparty and collateral frameworks; the fulfilment of minimum reserve requirements; participation in credit operations and recourse to standing facilities; and the conduct of outright asset purchase programmes. The paper also discusses the impact of monetary policy implementation on the Eurosystem's balance sheet, excess liquidity and money market liquidity conditions.
- JEL Code:
- D02,E43,E58,E65,G01
- Network:
- N/A
Annexes- 19 November 2018
- 30 April 2018
-
Working Paper Series - Issue No. 2147Details
- Abstract:
- We build a dynamic factor model with time-varying parameters and stochastic volatility and use it to decompose the variance of a large set of financial and macroeconomic variables for 22 OECD countries spanning from 1960 onwards into contributions from country-specific uncertainty, region-specific uncertainty and uncertainty common to all countries. We find that common global uncertainty plays a primary role in explaining the volatility of inflation, interest rates and stock prices, although to a varying extent over time. Region-specific uncertainty drives most of the exchange rate volatility for all Euro Area countries and for countries in North-America and Oceania. All uncertainty estimates (global, regional, country-specific and idiosyncratic) play a non-negligible role for real economic activity, credit and money for most countries. We also find that all uncertainty measures display significant recurrent fluctuations, that the recent peaks in uncertainty found for most estimates around 2008/2009 are comparable to those seen in the mid-1970s and early 1980s, and that all uncertainty measures appear to be strongly countercyclical and positively correlated with inflation.
- JEL Code:
- C15,C32,E32
- Network:
- N/A
- 30 April 2018
-
Monetary developments in the euro area
- 30 April 2018
-
Macroprudential Bulletin - Foreword - Issue No. 5
- 30 April 2018
-
Macroprudential Bulletin - Article - Issue No. 5Details
- Abstract:
- This article presents stylised facts from the euro area network of large exposures and derives model-based interconnectedness measures of SSM significant institutions. The article has three main findings. First, the interbank network is relatively sparse and suggests a core-periphery network structure. Second, the more complex network measures on average correlate highly with the more simple size-based interconnectedness indicators, constructed following the EBA guidelines on the calibration of O-SII buffers. Third, there is nevertheless value for policymakers to take into account network-based measures in addition to the size-based interconnectedness indicators, as for some individual banks those measures can deviate considerably.
- JEL Code:
- C63,G01,G21,G28
- 30 April 2018
-
Macroprudential Bulletin - Article - Issue No. 5Details
- Abstract:
- The rapid growth of the asset management sector over recent years has raised questions about the interaction between traditional banks and investment funds, as well as the drivers behind this trend. Our analysis contributes to this debate by shedding light on the implications of increased competition between the two sectors. We first examine how competition between banks and investment funds drives the risk profiles and market shares of these two sectors. In a second step, we assess whether and how capital requirements for banks influence the relative market shares of the two sectors, contributing to both the analysis of the drivers behind the structural developments in the euro area financial sector and the work on the evaluation of the impact of post-crisis reforms.
- JEL Code:
- G21,G23,G28
- 30 April 2018
-
Macroprudential Bulletin - Article - Issue No. 5Details
- Abstract:
- The European Commission’s proposals for the reform of EU banking rules aim to complete the post-crisis reform agenda and to address shortcomings in the current regulatory framework, notably in the Capital Requirements Regulation (CRR) and the Capital Requirements Directive (CRD IV). Once implemented, the changes will strengthen the regulatory architecture in the European Union, thereby contributing to the reduction of risks in the banking sector and paving the way for commensurate progress in completing the banking union. This article outlines and explains the ECB’s key messages concerning these proposals that are of particular importance for macroprudential regulation and policy. In particular, the ECB considers that the ongoing discussions on the CRR/CRD IV package provide the opportunity to make targeted changes to the macroprudential toolkit to make it more efficient and consistent. In the medium term, a comprehensive review of the macroprudential toolkit is still necessary to streamline procedures within the framework and to complement it with tools to address risks in the real estate and non-banking sectors.
- JEL Code:
- E58,G18,G28
- 30 April 2018
-
Macroprudential Bulletin - Annex - Issue No. 5
- 27 April 2018
- 27 April 2018
-
Governing Council decisions - Other decisions
- 27 April 2018
-
Euro area economic and financial developments by institutional sector (full)
- 27 April 2018
-
SpeechDetails
- Subtitle:
- Speaking points by Yves Mersch, Member of the Executive Board of the ECB, Eurofi conference, Sofia, 27 April 2018
- 27 April 2018
- 27 April 2018
- 26 April 2018
-
Working Paper Series - Issue No. 2146Details
- Abstract:
- We exploit election-driven turnover in State and local governments in Germany to study how banks adjust their securities portfolios in response to the loss of political connections. We find that local savings banks, which are owned by their host county and supervised by local politicians, increase significantly their holdings of home-State sovereign bonds when the local government and the State government are dominated by different political parties. Banks’ holdings of other securities, like federal bonds, bonds issued by other States, or stocks, are not affected by election outcomes. We argue that banks use sub-sovereign bond purchases to gain access to politically distant government authorities.
- JEL Code:
- G21,H63,P16
- Network:
- N/A
- 26 April 2018
-
Survey of Professional Forecasters - Issue No. 2018
- 26 April 2018
-
InterviewDetails
- Subtitle:
- Contribution by Sabine Lautenschläger, Member of the Executive Board of the ECB and Vice-Chair of the Supervisory Board of the ECB, Eurofi Newsletter, 26 April 2018
- 26 April 2018
-
InterviewDetails
- Subtitle:
- Contribution of Yves Mersch, Member of the Executive Board of the ECB, to the EUROFI magazine, submitted on 21 March 2018 and published on 26 April 2018
- 26 April 2018
- 26 April 2018
- 26 April 2018
- 26 April 2018
- 26 April 2018
- 26 April 2018
- 26 April 2018
- 26 April 2018
- 26 April 2018
- 26 April 2018
- 26 April 2018
-
Monetary policy statementDetails
- Subtitle:
- Mario Draghi, President of the ECB,Vítor Constâncio, Vice-President of the ECB,Frankfurt am Main, 26 April 2018
- 26 April 2018
-
Monetary policy decision
- 24 April 2018
-
Weekly financial statementAnnexes
- 24 April 2018
-
Weekly financial statement - Commentary
- 24 April 2018
-
Euro area bank lending survey - Issue No. 2018
- 24 April 2018
-
Press release
- 23 April 2018
-
SpeechDetails
- Subtitle:
- Panel intervention by Benoît Cœuré, Member of the Executive Board of the ECB, at the ILF Conference on “Resolution in Europe: the unresolved questions”, Frankfurt am Main, 23 April 2018
- 20 April 2018
-
SpeechDetails
- Subtitle:
- Statement by Mario Draghi, President of the ECB, at the thirty-seventh meeting of the International Monetary and Financial Committee, Washington D.C., 20 April 2018
- 19 April 2018
-
Balance of payments (monthly)
- 18 April 2018
-
Other publicationDetails
- Network:
- N/A
- 18 April 2018
-
Working Paper Series - Issue No. 2145Details
- Abstract:
- On March 10, 2016, the European Central Bank (ECB) announced the Corporate Sector Purchase Programme (CSPP) – commonly known as corporate quantitative easing (QE) – to improve the financing conditions of the Eurozone’s real economy and strengthen the pass-through of unconventional monetary interventions. Using a regression discontinuity design framework that exploits the rating wedge between the ECB and market participants, we show that: (i) bond yield spreads decline by around 15 basis points at the announcement of the programme, (ii) the impact is mostly noticeable in the sample of CSPP-eligible bonds that are perceived as high yield from the viewpoint of market participants and, (iii) the CSPP seems to have stimulated new issuance of corporate bonds. Overall, our results are consistent with the explanation that highlights the portfolio rebalancing mechanism and the liquidity channel.
- JEL Code:
- E50,E52,G11,G30,G32
- Network:
- N/A
- 18 April 2018
-
Working Paper Series - Issue No. 2144Details
- Abstract:
- We examine, conditional on structural shocks, the macroeconomic performance of different countercyclical capital buffer (CCyB) rules in small open economy estimated medium scale DSGE. We find that rules based on the credit gap create a trade-off between the stabilization of fluctuations originating in the housing market and fluctuations caused by foreign demand shocks. The trade-off disappears if the regulator targets house prices instead. As a result, the optimal simple CCyB rule depends only on the house price but not the credit gap. Moreover, the optimal simple rule leads to significant welfare gains compared to the no CCyB case.
- JEL Code:
- F41,G21,G28,E32,E44
- Network:
- N/A
- 17 April 2018
-
Weekly financial statementAnnexes
- 17 April 2018
-
Weekly financial statement - Commentary
- 16 April 2018
-
SpeechDetails
- Subtitle:
- Speech by Peter Praet, Member of the Executive Board of the ECB, at the NABE Symposium, 16 April 2018
- 16 April 2018
- 13 April 2018
-
Other publication - Issue No. 1Details
- Network:
- N/A
- 13 April 2018
-
Research Bulletin - Issue No. 45Details
- Abstract:
- The lower bound on nominal interest rates makes it desirable for monetary policy to aim for gradual adjustments of the policy rate in addition to the stabilisation of inflation and the output gap.
- JEL Code:
- E52,E61
- Network:
- N/A
- 12 April 2018
-
Press release
- 12 April 2018
-
SpeechDetails
- Subtitle:
- Speech by Benoît Cœuré, Member of the Executive Board of the ECB, at the CEPII 40th Anniversary Conference, Paris, 12 April 2018
Annexes- 11 April 2018
- 12 April 2018
-
Monetary policy account
- 12 April 2018
-
Euro area securities issues statistics
- 11 April 2018
-
Occasional Paper Series - Issue No. 208Details
- Abstract:
- On 24 November 2015, the European Commission published a proposal to establish a European Deposit Insurance Scheme (EDIS). The proposal provides for the creation of a Deposit Insurance Fund (DIF) with a target size of 0.8% of covered deposits in the euro area and the progressive mutualisation of its resources until a fully-fledged scheme is introduced by 2024. This paper investigates the potential impact and appropriateness of several features of EDIS in the steady state. The main findings are the following: first, a fully-funded DIF would be sufficient to cover payouts even in a severe banking crisis. Second, risk-based contributions can and should internalise specificities of banks and banking systems. This would tackle moral hazard and facilitate moving forward with risk sharing measures towards the completion of the Banking Union in parallel with risk reduction measures; this approach would also be preferable to lowering the target level of the DIF to take into account banking system specificities. Third, smaller and larger banks would not excessively contribute to EDIS relative to the amount of covered deposits in their balance sheet. Fourth, there would be no unwarranted systematic cross-subsidisation within EDIS in the sense of some banking systems systematically contributing less than they would benefit from the DIF. This result holds also when country-specific shocks are simulated. Fifth, under a mixed deposit insurance scheme composed of national deposit insurance funds bearing the first burden and a European deposit insurance fund intervening only afterwards, cross-subsidisation would increase relative to a fully-fledged EDIS. The key drivers behind these results are: i) a significant risk-reduction in the banking system and increase in banks' loss-absorbing capacity in the aftermath of the global financial crisis; ii) a super priority for covered deposits, further contributing to protect EDIS; iii) an appropriate design of risk-based contributions, benchmarked at the euro area level, following a "polluter-pays" approach.
- JEL Code:
- G21,G28
- Network:
- N/A
- 11 April 2018
-
SpeechDetails
- Subtitle:
- Introductory remarks and Q&A with Mario Draghi, President of the ECB, Frankfurt, 11 April 2018
- 11 April 2018
-
Working Paper Series - Issue No. 2143Details
- Abstract:
- Using micro-aggregated firm information for nine Central and Eastern European (CEE) countries and data from input-output tables, we examine the role of Global Value Chains (GVCs) for technology diffusion across EU countries. Our empirical results provide support for a two-stage diffusion process of technology across countries. In the first stage, the most productive firms in the host economy benefit from their direct exposure to new technology created in parent firms as a result of their GVC participation. In the second stage, technology spills over to the rest of firms in the host economy via domestic production networks. In addition, we show that the import of intermediate inputs –i.e. backward linkages- is the main channel of technology diffusion within GVCs. We use these results to explain the pronounced post-crisis drop in Total Factor Productivity (TFP) growth in CEE countries. We show that due to their deep integration in GVCs, CEE countries have been exposed to two recent developments highly correlated with their TFP performance: (i) a slowdown in TFP growth of parent firms located in non-CEE EU countries; and (ii) a global slowdown in the growth rate of GVC participation, which is evident also for CEE countries from 2011 onwards. Moreover, we find that the capacity of host firms in CEE countries to absorb and understand new knowledge has decreased since the crisis. We argue that this is related to the drop in R&D investment in the CEE region during the post-crisis period.
- JEL Code:
- O33,O47,O57,C33
- Network:
- Competitiveness Research Network
- 10 April 2018
-
Weekly financial statementAnnexes
- 10 April 2018
-
Weekly financial statement - Commentary
- 10 April 2018
-
InterviewDetails
- Subtitle:
- Interview with Benoît Cœuré, Member of the Executive Board of the ECB, conducted by Jean Leymarie on 9 April 2018 and published on 10 April 2018
- 10 April 2018
-
Working Paper Series - Issue No. 2142Details
- Abstract:
- Labor’s share of income has attracted interest in recent years reflecting its apparent decline. These falls, witnessed across many countries, are usually deemed undesirable. Any such assertion, however, begs the question of what is the socially optimal labor share. We address this question using a micro-founded endogenous growth model calibrated on US data. We find that in our central calibration the socially optimal labor share is 17% (11 pp) above the decentralized equilibrium, calibrated to match the average observed in history. We also study the dependence of both long-run growth equilibria on model parameters and relate our results to Piketty’s “laws of Capitalism”. Finally, we demonstrate that cyclical movements in factor income shares are socially optimal and that the decentralized equilibrium typically does not generate excess volatility.
- JEL Code:
- O33,O41
- Network:
- N/A
- 10 April 2018
-
Working Paper Series - Issue No. 2141Details
- Abstract:
- We propose a consumption-based model that allows for an inverted term structure of real and nominal risk-free rates. In our framework the agent is subject to time-varying macroeconomic risk and interest rates at all maturities depend on her risk perception which shape saving propensities over time. In bad times, when risk is perceived to be higher in the short- than the long-term, the agent would prefer to hedge against low realizations of consumption in the near future by investing in long-term securities. This determines, in equilibrium, the inversion of the yield curve. Pricing time-varying consumption volatility risk is essential for obtaining the inversion of the real curve and allows to price the average level and slope of the nominal one.
- JEL Code:
- G12
- Network:
- N/A
- 10 April 2018
- 9 April 2018
-
SpeechDetails
- Subtitle:
- Speech by Peter Praet[1], Member of the Executive Board of the ECB, at the European Finance Forum, Frankfurt, 9 April 2018
Annexes- 8 April 2018
- 9 April 2018
-
Other publicationDetails
- Network:
- N/A
- 9 April 2018
-
Feedback on the input provided by the European Parliament as part of its resolution on the ECB’s Annual Report
- 9 April 2018
-
SpeechDetails
- Subtitle:
- Introductory remarks by Vítor Constâncio, Vice-President of the ECB, Brussels, 9 April 2018
- 9 April 2018
-
Annual Report
- 6 April 2018
-
InterviewDetails
- Subtitle:
- Interview with Benoît Cœuré, Member of the Executive Board of the ECB, conducted by Steve Sedgwick on 6 April 2018
- 6 April 2018
-
Working Paper Series - Issue No. 2140Details
- Abstract:
- We compare real-time density forecasts for the euro area using three DSGE models. The benchmark is the Smets-Wouters model and its forecasts of real GDP growth and inflation are compared with those from two extensions. The first adds financial frictions and expands the observables to include a measure of the external finance premium. The second allows for the extensive labor-market margin and adds the unemployment rate to the observables. The main question we address is if these extensions improve the density forecasts of real GDP and inflation and their joint forecasts up to an eight-quarter horizon. We find that adding financial frictions leads to a deterioration in the forecasts, with the exception of longer-term inflation forecasts and the period around the Great Recession. The labor market extension improves the medium to longer-term real GDP growth and shorter to medium-term inflation forecasts weakly compared with the benchmark model.
- JEL Code:
- C11,C32,C52,C53,E37
- Network:
- N/A
- 6 April 2018
-
Working Paper Series - Issue No. 2139Details
- Abstract:
- We present a two-country model with an enhanced banking sector featuring risky lending and cross-border interbank market frictions. We find that (i) the strength of the financial accelerator, when applied to banks operating under uncertainty in an interbank market, will critically depend on the economic and financial structure of the economy; (ii) adverse shocks to the real economy can be the source of banking crisis, causing an increase in interbank funding costs, aggravating the initial shock; and (iii) central bank asset purchases and long-term refinancing operations can be effective substitutes for, or supplements to, conventional monetary policy.
- JEL Code:
- E44,E52,F32,F36
- Network:
- N/A
- 6 April 2018
-
Euro area economic and financial developments by institutional sector (early)
- 6 April 2018
- 6 April 2018
-
Balance of payments (quarterly)
- 6 April 2018
-
SpeechDetails
- Subtitle:
- Panel contribution by Benoît Cœuré, Member of the Executive Board of the ECB, at the 29th edition of the workshop “The Outlook for the Economy and Finance”, “Villa d’Este”, Cernobbio, 6 April 2018
- 5 April 2018
-
Other publicationDetails
- Network:
- N/A
Related- 7 June 2015
-
Other publication
- 5 April 2018
-
Weekly financial statementAnnexes
- 5 April 2018
-
Weekly financial statement - Commentary
- 5 April 2018
-
Euro money market statistics
- 4 April 2018
-
MFI interest rate statistics
- 28 March 2018
-
InterviewDetails
- Subtitle:
- Contribution of Benoît Cœuré, member of the Executive Board of the European Central Bank, to the 2018 Schuman Report on Europe, 28 March 2018
- 28 March 2018
-
Working Paper Series - Issue No. 2138Details
- Abstract:
- I show that the detrending of financial variables with the Hodrick and Prescott (1981, 1997) (HP) and band-pass filters leads to spurious cycles. I find that distortions become especially severe when considering medium-term cycles, i.e., cycles that exceed the duration of regular business cycles. In particular, these medium-term filters amplify the variances of cycles of duration around 20 to 30 years up to a factor of 204, completely cancelling out shorter-term fluctuations. This is important because it is common practice, and recommended under Basel III, to extract medium-term cycles using such filters; e.g., the HP filter with a smoothing parameter of 400,000. In addition, I find that financial cycle facts, i.e., differing amplitude, duration, and synchronisation of cycles in financial variables relative to cycles in GDP, are robust. For HP and band-pass filters, differences to GDP become marginal due to spurious cycles.
- JEL Code:
- C10,E32,E44,E58,G01
- Network:
- N/A
- 27 March 2018
-
Weekly financial statementAnnexes
- 27 March 2018
-
Weekly financial statement - Commentary
- 27 March 2018
-
Monetary developments in the euro area
- 27 March 2018
- 27 March 2018
-
Other publicationDetails
- Network:
- N/A
- 26 March 2018
-
Working Paper Series - Issue No. 2137Details
- Abstract:
- Recent debate has focused on the introduction of a central stabilisation capacity as a completing element of the Economic and Monetary Union. Its main objective would be to contribute cushioning country-specific economic shocks, especially when national fiscal stabilisers are run down. There are two main potential objections to such schemes proposed so far: first, they may lead to moral hazard, i.e. weaken the incentives for sound fiscal policies and structural reforms. Second, they may generate permanent transfers among countries. Here we present a scheme that is relatively free from moral hazard, because the transfers are based on changes in world trade in the various sectors. These changes can be considered as largely exogenous, hence independent from an individual government’s policy; therefore, the scheme is better protected against manipulation. Our scheme works as follows: if a sector is hit by a bad shock at the world market level, then a country with an economic structure that is skewed towards this sector receives a (one-time) transfer from the other countries. The scheme is designed such that the transfers add up to zero each period, hence obviating the need for a borrowing capacity. We show that the transfers generated by our scheme tend to be countercyclical and larger when economies are less diversified. In addition, since transfers are based on temporary changes in world trade, the danger of permanent transfers from one set of countries to the other countries is effectively ruled out. Finally, we show that transfers are quite robust to revisions in the underlying export data.
- JEL Code:
- E32,E62,E63
- Network:
- N/A
- 26 March 2018
-
Occasional Paper Series - Issue No. 207Details
- Abstract:
- Since the global financial crisis, the Global Financial Safety Net (GFSN), traditionally consisting mainly of countries’ own foreign exchange reserves with the International Monetary Fund (IMF) acting as a backstop, has expanded significantly with the continued accumulation of reserves, the sharp increase of swap lines between central banks, and the further development and creation of new Regional Financing Arrangements (RFAs). RFAs have expanded, reaching an aggregate size comparable to that of the IMF and becoming an integral layer of the safety net. Enhancing the cooperation between the IMF and RFAs so that they play complementary roles in case of global distress, becomes critical in order to further strengthen the multi-layered GFSN, while paying attention to issues such as moral hazard, stigma or exit strategies in connection with IMF-RFA cooperation. This paper presents recent experience and lessons learned in IMF-RFA cooperation and proposes how to improve their future interaction.
- JEL Code:
- F33,F34,F53,F55
- Network:
- N/A
- 26 March 2018
-
Other publicationDetails
- Network:
- N/A
- 26 March 2018
-
Other publicationDetails
- Network:
- N/A
- 23 March 2018
- 23 March 2018
-
Governing Council decisions - Other decisions
- 22 March 2018
-
Economic Bulletin - Article - Issue No. 2Economic Bulletin Issue 2, 2018Details
- Abstract:
- This article reviews the existing literature on financial constraints and their effect on investment. It also provides new evidence on this issue using a large sample of firms from 12 European countries for the period 2014-17. The data come from the ECB and European Commission survey on the access to finance of enterprises (SAFE), which focuses specifically on small and medium-sized enterprises (SMEs). The available evidence suggests that credit constraints play a crucial role in the investment decisions of non-financial corporations.
- JEL Code:
- G32,E22
- Network:
- N/A
- 22 March 2018
-
Economic Bulletin - Box - Issue No. 2Economic Bulletin Issue 2, 2018Details
- Abstract:
- Timely and reliable statistics are essential for economic analysis. This box reviews and assesses the reliability of Eurostat’s preliminary flash estimate of quarterly GDP growth for the euro area, which was introduced at the beginning of 2016. It was a welcome development in terms of the continuous efforts to improve Europe’s statistical landscape given that the euro area’s single monetary policy is dependent on timely, reliable and comparable indicators that accurately reflect economic developments. To further support a more thorough analysis of macroeconomic developments at euro area level few challenges remain and some improvements are desirable such as the development of relevant euro area and country-level statistics soon after the end of the reference quarter. It is also important to enhance the quality of the source data that are used as inputs for preliminary flash estimates (e.g. short-term statistics on services). These improvements will ultimately increase the reliability of preliminary flash estimates and make them more useful, thereby facilitating more detailed economic analysis.
- JEL Code:
- E01,E20
- Network:
- N/A
- 22 March 2018
-
Economic Bulletin - Box - Issue No. 2Economic Bulletin Issue 2, 2018Details
- Abstract:
- This box assesses to what extent changes in seasonality and idiosyncratic price changes (defined as outliers) can explain recent short-term volatility in the profile of euro area HICP inflation excluding food and energy.
- JEL Code:
- E31,C32
- Network:
- N/A
- 22 March 2018
-
Economic Bulletin - Box - Issue No. 2Economic Bulletin Issue 2, 2018Details
- Abstract:
- The box looks at the fiscal policy stance in the euro area during past expansionary periods and the extent to which good economic times have been used to build fiscal buffers. It argues that the midly countercyclical or broadly netrual stance that prevailed during the expansionary phase before the financial crisis was not sufficient to built adequate buffers fo the following recession.
- JEL Code:
- E62,H60
- Network:
- N/A
- 22 March 2018
-
Economic Bulletin - Box - Issue No. 2Economic Bulletin Issue 2, 2018Details
- Abstract:
- The European Commission’s 2018 assessment of macroeconomic imbalances and progress on reforms provides confirmation that greater efforts are needed in many EU Member States in order to advance economic growth and resilience on a more sustainable basis.
- JEL Code:
- E60,F42
- Network:
- N/A
- 22 March 2018
-
Economic Bulletin - BoxEconomic Bulletin Issue 2, 2018Details
- Abstract:
- This box describes the ECB's monetary policy operations during the seventh and eighth reserve maintenance periods of 2018, which ran from 1 November to 19 December 2017 and from 20 December 2017 to 30 January 2018 respectively. During this period, the interest rates on the main refinancing operations (MROs), the marginal lending facility and the deposit facility remained unchanged at 0.00%, 0.25% and -0.40% respectively.
- JEL Code:
- E40,E52,E58
- Network:
- N/A
- 22 March 2018
-
Economic Bulletin - BoxEconomic Bulletin Issue 2, 2018Details
- Abstract:
- In the euro area, there has been an increasing reliance on part-time work. The share of part-time workers is now about 22% of total employment, and part-time work has accounted for about one quarter of net employment growth over the euro area labour market recovery (starting in the second quarter of 2013). This box examines the latest developments and the characteristics of the two main groups of part-time workers: underemployed and non-underemployed part-time workers.
- JEL Code:
- J01,J21
- Network:
- N/A
- 22 March 2018
-
Balance of payments (monthly)
- 22 March 2018
-
Economic Bulletin
- 22 March 2018
-
SpeechDetails
- Subtitle:
- Speech by Sabine Lautenschläger, Member of the Executive Board of the ECB and Vice-Chair of the Supervisory Board of the ECB, 9th Annual EFR Stakeholder Round Table on "Financial Fragmentation or Integration", Brussels, 22 March 2018
- 21 March 2018
-
Economic Bulletin - Box - Issue No. 2Economic Bulletin Issue 2, 2018Details
- Abstract:
- Oil prices increased from around USD 45 per barrel at end-June 2017 to about USD 65 per barrel at the beginning of March 2018. The main drivers of this increase were stronger than expected growth in global demand, the strategy adopted by the Organization of the Petroleum Exporting Countries (OPEC) and some non-OPEC countries to adjust their production – partly offset by rising US production – and geopolitical events. This box analyses these factors, based on a structural vector autoregressive (SVAR) model, and assesses whether they are likely to persist.
- JEL Code:
- C32,F53,Q41,Q43
- Network:
- N/A
- 20 March 2018
-
Weekly financial statementAnnexes
- 20 March 2018
-
Weekly financial statement - Commentary
- 20 March 2018
-
Economic Bulletin - Article - Issue No. 2Economic Bulletin Issue 2, 2018Details
- Abstract:
- This article examines the macroeconomic and fiscal implications of population ageing in the euro area and looks at how pension reforms can help to address these challenges. According to Eurostat’s latest projections, population ageing is set to continue and even intensify in the euro area over the next few decades. This ongoing process, which stems from increases in life expectancy and low fertility rates, is widely expected to lead to a decline in the labour supply and productivity losses, as well as behavioural changes, and is likely to have an adverse effect on potential growth. Moreover, by causing increases in precautionary savings, ageing can be expected to have a dampening impact on interest rates over an extended period of time. Population ageing also entails changes in relative prices, mainly owing to shifts in demand, with demand for services rising. Furthermore, euro area countries are also projected to experience further upward pressure on public spending on pensions, health care and long-term care as their populations age. Although many euro area countries implemented pension reforms following the sovereign debt crisis, further reforms appear to be necessary in order to ensure fiscal sustainability in the long run. In this respect, measures that increase the retirement age can be expected to dampen the adverse macroeconomic effects of ageing, as they will have a favourable impact on the labour supply and domestic consumption. In contrast, increasing the contribution rate or reducing the benefit ratio could have less favourable macroeconomic implications.
- JEL Code:
- H55,J11,J14,E62
- Network:
- N/A
- 19 March 2018
-
SpeechDetails
- Subtitle:
- Speech by Yves Mersch, Member of the Executive Board of the ECB, at the Schweizerisch-Deutscher Wirtschaftsclub, Frankfurt am Main, 19 March 2018
- 19 March 2018
- 19 March 2018
-
Research Bulletin - Issue No. 44Details
- Abstract:
- Recent research finds that consumers respond more strongly to negative than to positive transitory income shocks, for example, a temporary income tax increase as opposed to a one-off bonus payment. It also suggests that the response can depend on the size of the change in income. These findings lend empirical support to economic models that incorporate liquidity constraints and precautionary saving.
- JEL Code:
- D12,D14,E21
- Network:
- N/A
- 19 March 2018
-
Economic Bulletin - Box - Issue No. 2Economic Bulletin Issue 2, 2018Details
- Abstract:
- The liquidity of euro area sovereign bond markets is important for the transmission of the ECB’s monetary policy. In particular, a high degree of liquidity fosters the link between the ECB’s monetary policy decisions, the yield curve, financial asset prices in general, and the overall cost and flow of finance in the economy. The liquidity of sovereign bond markets needs to be monitored more closely since the implementation of the ECB’s public sector purchase programme (PSPP), under which a significant share of outstanding euro area sovereign bonds has been bought. Against this background, this box presents some of the market liquidity indicators that the ECB monitors regularly. Overall, the indicators suggest that liquidity conditions in sovereign bond markets have not deteriorated since the start of the PSPP (on 9 March 2015).
- JEL Code:
- E52,G12,G14
- Network:
- N/A
- 16 March 2018
-
InterviewDetails
- Subtitle:
- Interview with Peter Praet, Member of the Executive Board of the ECB, conducted by Balazs Koranyi on 14 March 2018 and published on 16 March 2018
- 16 March 2018
-
Euro area insurance corporations statistics
- 15 March 2018
-
SpeechDetails
- Subtitle:
- Speech by Sabine Lautenschläger, Member of the Executive Board of the ECB and Vice-Chair of the Supervisory Board of the ECB, Lecture at the Florence School of Banking and Finance, Florence, 15 March 2018
- 15 March 2018
- 14 March 2018
-
SpeechDetails
- Subtitle:
- Speech by Benoît Cœuré, Member of the Executive Board of the ECB, at the Finanzmarktklausur of the CDU Wirtschaftsrat, Berlin, 14 March 2018
- 14 March 2018
- 14 March 2018
-
SpeechDetails
- Subtitle:
- Speech by Vítor Constâncio, Vice-President of the ECB, at the ECB and Its Watchers XIX Conference, Frankfurt am Main, 14 March 2018
- 14 March 2018
-
SpeechDetails
- Subtitle:
- Speech by Peter Praet, Member of the Executive Board of the ECB, at The ECB and Its Watchers XIX Conference, Frankfurt am Main, 14 March 2018
- 14 March 2018
-
SpeechDetails
- Subtitle:
- Speech by Mario Draghi, President of the ECB, The ECB and Its Watchers XIX Conference organised by the Institute for Monetary and Financial Stability, Frankfurt, 14 March 2018
- 14 March 2018
-
SpeechDetails
- Subtitle:
- Introductory remarks by Benoît Cœuré, Member of the Executive Board of the ECB, at a roundtable organised by FinLeap, Berlin, 14 March 2018
- 14 March 2018
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InterviewDetails
- Subtitle:
- Interview with Yves Mersch, Member of the Executive Board of the ECB, conducted by Pierre Sorlut and Barbara Tasch on 8 March and published on 14 March 2018
- 13 March 2018
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Weekly financial statementAnnexes
- 13 March 2018
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Weekly financial statement - Commentary
- 13 March 2018
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InterviewDetails
- Subtitle:
- Opinion piece by Benoît Cœuré, Member of the Executive Board of the ECB and Chair of the Bank for International Settlements (BIS) Committee on Payments and Market Infrastructures (CPMI), co-authored by Jacqueline Loh, chair of the BIS Markets Committee, published in the Financial Times on 13 March 2018
- 12 March 2018
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InterviewDetails
- Subtitle:
- Interview with Benoît Cœuré, Member of the Executive Board of the ECB, conducted by Stéphane Soumier on 12 March 2018
- 12 March 2018
-
Press release
- 12 March 2018
-
Euro area securities issues statistics
- 9 March 2018
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SpeechDetails
- Subtitle:
- Speech by Sabine Lautenschläger, Member of the Executive Board of the ECB and Vice-Chair of the Supervisory Board of the ECB, at the first meeting of the Euro Cyber Resilience Board for pan-European Financial Infrastructures, Frankfurt am Main, 9 March 2018
- 9 March 2018
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SpeechDetails
- Subtitle:
- Introductory remarks by Benoît Cœuré, Member of the Executive Board of the ECB, at the first meeting of the Euro Cyber Resilience Board for pan-European Financial Infrastructures, Frankfurt, 9 March 2018
- 8 March 2018
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Press release
- 8 March 2018
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Macroeconomic projections for the euro areaAnnexes
- 8 March 2018
- 8 March 2018
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Monetary policy statementDetails
- Subtitle:
- Mario Draghi, President of the ECB,Vítor Constâncio, Vice-President of the ECB,Frankfurt am Main, 8 March 2018
- 8 March 2018
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Monetary policy decision
- 7 March 2018
- 6 March 2018
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Weekly financial statementAnnexes
- 6 March 2018
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Weekly financial statement - Commentary
- 5 March 2018
-
MFI interest rate statistics
- 28 February 2018
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Working Paper Series - Issue No. 2136Details
- Abstract:
- We suggest a new method dealing with the problem of endogeneity of the threshold variable in single regression threshold models and seemingly unrelated systems of them based on copula theory. This theory enables us to relax the assumption that the threshold variable is normally distributed and to capture the dependence between the error term and the threshold variable in each regime of the model independently of the marginal distribution of the threshold variable. This distribution can be estimated non-parametrically conditionally on the value of threshold parameter. To estimate the slope and threshold parameters of the model adjusted for the endogeneity of the threshold variable, we suggest a two-step concentrated least squares estimation method where the threshold parameter is estimated based on a search procedure, in the first step. A Monte Carlo study indicates that the suggested method deals with the endogeneity problem of the threshold variable satisfactorily. As an empirical illustration, we estimate a threshold model of the foreign-trade multiplier conditional on the real exchange rate volatility regime. We suggest a bootstrap procedure to examine if there are significant differences in the foreign-trade multiplier effects across the two regimes of the model, under potential endogeneity of the threshold variable.
- JEL Code:
- C12,C13,C21,C22
- Network:
- N/A
- 27 February 2018
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Working Paper Series - Issue No. 2135Details
- Abstract:
- For centuries, defaulting governments were immune from legal action by foreign creditors. This paper shows that this is no longer the case. Building a dataset covering four decades, we find that creditor lawsuits have become an increasingly common feature of sovereign debt markets. The legal developments have strengthened the hands of creditors and raised the cost of default for debtors. We show that legal disputes in the US and the UK disrupt government access to international capital markets, as foreign courts can impose a financial embargo on sovereigns. The findings are consistent with theoretical models with creditor sanctions and suggest that sovereign debt is becoming more enforceable. We discuss how the threat of litigation affects debt management, government willingness to pay, and the resolution of debt crises.
- JEL Code:
- F34,G15,H63,K22
- Network:
- N/A
- 27 February 2018
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Working Paper Series - Issue No. 2134Details
- Abstract:
- We bring together the spatial and global vector autoregressive (GVAR) classes of econometric models by providing a detailed methodological review of where they meet in terms of structure, interpretation, and estimation methods. We discuss the structure of cross-section connectivity (weight) matrices used by these models and its implications for estimation. Primarily motivated by the continuously expanding literature on spillovers, we define a broad and measurable concept of spillovers. We formalize it analytically through the indirect effects used in the spatial literature and impulse responses used in the GVAR literature. Finally, we propose a practical step-by-step approach for applied researchers who need to account for the existence and strength of cross-sectional dependence in the data. This approach aims to support the selection of the appropriate modeling and estimation method and of choices that represent empirical spillovers in a clear and interpretable form.
- JEL Code:
- C33,C38,C51
- Network:
- N/A
- 27 February 2018
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Weekly financial statementAnnexes
- 27 February 2018
-
Weekly financial statement - Commentary
- 27 February 2018
-
Monetary developments in the euro area
- 27 February 2018
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SpeechDetails
- Subtitle:
- Speech by Yves Mersch, Member of the Executive Board of the ECB, at the Second Annual Conference on “Fintech and Digital Innovation: Regulation at the European level and beyond”, Brussels, 27 February 2018
- 26 February 2018
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Working Paper Series - Issue No. 2133Details
- Abstract:
- Central bank announcements simultaneously convey information about monetary policy and the central bank’s assessment of the economic outlook. This paper disentangles these two components and studies their effect on the economy using a structural vector autoregression. It relies on the information inherent in high-frequency comovement of interest rates and stock prices around policy announcements: a surprise policy tightening raises interest rates and reduces stock prices, while the complementary positive central bank information shock raises both. These two shocks have intuitive and very different effects on the economy. Ignoring the central bank information shocks biases the inference on monetary policy non-neutrality. We make this point formally and offer an interpretation of the central bank information shock using a New Keynesian macroeconomic model with financial frictions.
- JEL Code:
- E32,E52,E58
- Network:
- N/A
- 26 February 2018
-
Working Paper Series - Issue No. 2132Details
- Abstract:
- We propose a class of prior distributions that discipline the long-run behavior of Vector Autoregressions (VARs). These priors can be naturally elicited using economic theory, which provides guidance on the joint dynamics of macroeconomic time series in the long run. Our priors for the long run are conjugate, and can thus be easily implemented using dummy observations and combined with other popular priors. In VARs with standard macroeconomic variables, a prior based on the long-run predictions of a wide class of theoretical models yields substantial improvements in the forecasting performance.
- JEL Code:
- C11,C32,E37
- Network:
- N/A
- 26 February 2018
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SpeechDetails
- Subtitle:
- Introductory Statement by Mario Draghi, President of the ECB, at the ECON committee of the European Parliament, Brussels, 26 February 2018
Annexes- 25 February 2018
- 26 February 2018
-
SpeechDetails
- Subtitle:
- Welcome address by Benoît Cœuré, Member of the Executive Board of the ECB, at the first meeting of the Working Group on Euro Risk-Free Rates, at the ECB, Frankfurt am Main, 26 February 2018
- 25 February 2018
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Working Paper Series - Issue No. 2131Details
- Abstract:
- We assess the ability of yield curve factors to predict risk premia in short-term interest rates and exchange rates across a large sample of major advanced economies. We find that the same tick-shaped linear combination of (relative) bond yields predicts risk premia in both short-term interest rates and exchange rates at returnforecasting horizons of up to six months for all (but one) countries and currencies in our sample. Our single forecasting factor loads positively on the short and long end of the curve and negatively on the medium-term and is therefore inversely related to Nelson-Siegel’s curvature factor. In line with recent interpretations of the yield curve factors, our findings suggest that the hump of the yield curve bears important information about future short-term interest rates. A relatively high curvature predicts a surprise rise in short-term interest rates beyond expectations and, coincidentally, an appreciation of the home currency in line with uncovered interest rate parity.
- JEL Code:
- C23,C53,G11
- Network:
- N/A
- 25 February 2018
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Working Paper Series - Issue No. 2130Details
- Abstract:
- This paper examines the drivers of the retrenchment in cross-border banking in the European Union (EU) since the global financial crisis, which stands out in international comparison as banks located in the euro area and in the rest of the EU reduced their cross-border claims by around 25%. Particularly striking is the sharp and sustained reduction in intra-EU claims, especially in the form of deleveraging from cross-border interbank loans. Examining a wide range of possible determinants, we identify high non-performing loans as an important impediment to cross-border lending after the crisis, highlighting the spillovers from national banking sector conditions across the EU. We also find evidence that prudential policies can entail spillovers via cross-border banking in the EU, albeit with heterogeneity across instruments in terms of direction, magnitude and significance. Our results do not point to a major role of newly introduced bank levies in explaining cross-border banking developments.
- JEL Code:
- F21,F30,F42,G15,G28
- Network:
- N/A
- 23 February 2018
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SpeechDetails
- Subtitle:
- Speech by Benoît Cœuré, Member of the Executive Board of the ECB, at the 2018 US Monetary Policy Forum, New York City, 23 February 2018
Annexes- 22 February 2018
- 23 February 2018
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Governing Council decisions - Other decisions
- 22 February 2018
-
Monetary policy account
- 22 February 2018
-
SpeechDetails
- Subtitle:
- Speech by Yves Mersch, Member of the Executive Board of the ECB, at the European Banking Federation’s Executive Committee, Frankfurt am Main, 22 February 2018
- 22 February 2018
-
Annual consolidated balance sheet of the Eurosystem
- 22 February 2018
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Annual Accounts
- 22 February 2018
-
Press release
- 20 February 2018
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Weekly financial statementAnnexes
- 20 February 2018
-
Weekly financial statement - Commentary
- 20 February 2018
-
Euro money market statistics
- 19 February 2018
- 19 February 2018
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Euro area investment fund statistics
- 19 February 2018
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Euro area financial vehicle corporation statistics
- 19 February 2018
-
Balance of payments (monthly)
- 16 February 2018
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SpeechDetails
- Subtitle:
- Speech by Benoît Cœuré, Member of the Executive Board of the ECB, NBRM High Level International Conference on Monetary Policy and Asset Management, Skopje, 16 February 2018
Annexes- 16 February 2018
- 15 February 2018
- 15 February 2018
-
SpeechDetails
- Subtitle:
- Speech by Sabine Lautenschläger, Member of the Executive Board of the ECB and Vice-Chair of the Supervisory Board of the ECB, Dutch Banking Day, Amsterdam, 15 February 2018
- 15 February 2018
-
SpeechDetails
- Subtitle:
- Presentation by Peter Praet, Member of the Executive Board of the ECB, at the joint French Treasury / IMF conference entitled “Transforming France’s economy and completing the integration of the Eurozone”, Paris, 15 February 2018
- 15 February 2018
-
SpeechDetails
- Subtitle:
- Speech by Yves Mersch, Member of the Executive Board of the ECB, Paris, 15 February 2018
- 14 February 2018
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SpeechDetails
- Subtitle:
- Speech by Yves Mersch, Member of the Executive Board of the ECB, at the 4th Bargeldsymposium of the Deutsche Bundesbank, Frankfurt am Main, 14 February 2018
- 13 February 2018
-
Weekly financial statementAnnexes
- 13 February 2018
-
Weekly financial statement - Commentary
- 13 February 2018
-
Research Bulletin - Issue No. 43Details
- Abstract:
- This article shows how the pass-through of negative policy rates via bank lending depends on a bank’s funding structure. When policy rates enter negative territory, high-deposit banks increase risk-taking but reduce lending in the syndicated loan market relative to low-deposit banks. The increase in risk-taking reduces financial constraints for higher risk firms.
- JEL Code:
- E44,E52,E58,G20,G21
- Network:
- Research Task Force (RTF)
- 12 February 2018
-
Euro area securities issues statistics
- 9 February 2018
-
Statistics Paper Series - Issue No. 27Details
- Abstract:
- The European Central Bank (ECB), as part of its forward-looking strategy, needs high-quality financial market statistical indicators as a means to facilitate evidence-based and sound decision-making. Such indicators include timely market intelligence and information to gauge investors’ expectations and reaction functions with regard to policy decisions. The main use of yield curve estimations from an ECB monetary policy perspective is to obtain a proper empirical representation of the term structure of interest rates for the euro area which can be interpreted in terms of market expectations of monetary policy, economic activity and inflation expectations over short-, medium- and long-term horizons. Yield curves therefore play a pivotal role in the monitoring of the term structure of interest rates in the euro area. In this context, the purpose of this paper is twofold: firstly, to pave the way for a conceptual framework with recommendations for selecting a high-quality government bond sample for yield curve estimations, where changes mainly reflect changes in the yields-to-maturity rather than in other attributes of the underlying debt securities and models; and secondly, to supplement the comprehensive – mainly theoretical – literature with the more empirical side of term structure estimations by applying statistical tests to select and produce representative yield curves for policymakers and market-makers.
- JEL Code:
- G1,E4,E5
- Network:
- N/A
- 8 February 2018
-
Other publicationDetails
- Network:
- N/A
- 8 February 2018
-
Other publicationDetails
- Network:
- N/A
- 8 February 2018
-
Other publicationDetails
- Network:
- N/A
- 8 February 2018
-
Other publicationDetails
- Network:
- N/A
- 8 February 2018
- 8 February 2018
-
SpeechDetails
- Subtitle:
- Remarks by Peter Praet, Member of the Executive Board of the ECB, at the GIC/SUERF/Deutsche Bundesbank Conference, Frankfurt am Main, 8 February 2018
Annexes- 8 February 2018
- 8 February 2018
-
Economic Bulletin
- 8 February 2018
-
Economic Bulletin - Box - Issue No. 1Economic Bulletin Issue 1, 2018Details
- Abstract:
- House price increases over the past few years may have implications for housing affordability. This box discusses some selected indicators of affordability both at the macro and micro level, and investigate the effects for renters, owner and potential buyers.
- JEL Code:
- R30,E31
- Network:
- N/A
- 8 February 2018
-
InterviewDetails
- Subtitle:
- Interview with Yves Mersch, Member of the Executive Board of the ECB, conducted by Piotr Skolimowski and Carolynn Look on 6 February 2018
- 8 February 2018
-
SpeechDetails
- Subtitle:
- Lecture by Yves Mersch, Member of the Executive Board of the ECB, Official Monetary and Financial Institutions Forum, London, 8 February 2018
- 8 February 2018
-
InterviewDetails
- Subtitle:
- Interview on Twitter with Peter Praet, Member of the Executive Board of the ECB, conducted and published on 08 February 2018
- 7 February 2018
-
Economic Bulletin - Article - Issue No. 1Economic Bulletin Issue 1, 2018Details
- Abstract:
- This article examines the main factors behind the recent changes in euro area labour supply and how they have influenced employment developments. It finds that the increasing supply from older people and women, as well as immigration, have had a significant influence on employment growth during the economic recovery. Both migration and the numbers of older people and women in or seeking work have been driven by long-term trends and structural changes, while migration has also been affected by several cyclical factors. In the medium to longer term, labour supply is expected to decline as the population ages. This calls for policies to support labour force and employment growth, for example by helping the long-term unemployed, migrants and other groups whose participation rates remain low, to enter or return to the labour market, or find jobs that better match their skills.
- JEL Code:
- J01,J21,J22,J61
- Network:
- N/A
- 6 February 2018
-
Weekly financial statementAnnexes
- 6 February 2018
-
Weekly financial statement - Commentary
- 6 February 2018
-
Economic Bulletin - Box - Issue No. 1Economic Bulletin Issue 1, 2018Details
- Abstract:
- Growth in the consumption of durable goods has been very strong in recent years. During the financial crisis, durable goods consumption contracted sharply, although the car scrappage schemes in several euro area countries provided some relief by encouraging purchases of new cars (e.g. in 2009). Since 2013, durable goods consumption has again grown vigorously, pushing up growth in overall consumption. The recovery observed in real disposable incomes and the easing of financing conditions have both boosted households’ appetite for durable goods, particularly in those euro area countries that were more affected by the financial crisis.
- JEL Code:
- E21,E32
- Network:
- N/A
- 5 February 2018
-
SpeechDetails
- Subtitle:
- Introductory statement and closing remarks by Mario Draghi, President of the ECB, Strasbourg, 5 February 2018
- 5 February 2018
-
Economic Bulletin - Box - Issue No. 1Economic Bulletin Issue 1, 2018Details
- Abstract:
- Following the passing of legislation on the US tax reform towards the end of last year, this box summarises its main features and assesses the channels via which the reform may affect the US macroeconomy. It also discusses possible spillovers and implications from a European perspective.
- JEL Code:
- H25,H87
- Network:
- N/A
- 4 February 2018
-
Working Paper Series - Issue No. 2129Details
- Abstract:
- Quantitative analysis of a New Keynesian model with the Bernanke-Gertler accelerator and risk shocks shows that violations of Tinbergen’s Rule and strategic interaction between policymaking authorities undermine significantly the effectiveness of monetary and financial policies. Separate monetary and financial policy rules, with the latter subsidizing lenders to encourage lending when credit spreads rise, produce higher welfare and smoother business cycles than a monetary rule augmented with credit spreads. The latter yields a tight money-tight credit regime in which the interest rate responds too much to inflation and not enough to adverse credit conditions. Reaction curves for the choice of policy-rule elasticity that minimizes each authority’s loss function given the other authority’s elasticity are nonlinear, reflecting shifts from strategic substitutes to complements in setting policy-rule parameters. The Nash equilibrium is significantly inferior to the Cooperative equilibrium, both are inferior to a first-best outcome that maximizes welfare, and both produce tight money-tight credit regimes.
- JEL Code:
- E44,E52,E58
- Network:
- N/A
- 4 February 2018
-
Working Paper Series - Issue No. 2128Details
- Abstract:
- A key insight from the open economy literature is that domestic price stability is in general not optimal for countries that exert some market power over their terms of trade. Under commitment, a national benevolent monetary policymaker improves upon the allocation associated with stable domestic prices by manipulating the terms of trade to her own country’s advantage. In this paper, I study optimal monetary policy in a sticky-price small open economy model when the policymaker lacks a commitment device. Without commitment, the benevolent policymaker’s attempt to improve national welfare by manipulating the terms of trade can be self-defeating. By steering international relative prices the discretionary policymaker induces fluctuations in domestic prices, the costs of which she is unable to fully internalize in her decision-making. Society may thus be better off if it appoints an inward-looking policymaker who aims for domestic price stability and resists the temptation to exploit the country’s monopoly power in trade. Accounting for the effective lower bound on nominal interest rates further strengthens the case for the inward-looking policy objective.
- JEL Code:
- E52,F41
- Network:
- N/A
- 2 February 2018
- 2 February 2018
-
SpeechDetails
- Subtitle:
- Speech by Benoît Cœuré, Member of the Executive Board of the ECB, at the conference “Deepening of EMU”, Ljubljana, 2 February 2018
- 1 February 2018
-
SpeechDetails
- Subtitle:
- Speech by Peter Praet, Member of the Executive Board of the ECB, at the Cercle de Lorraine, Brussels, 1 February 2018
- 1 February 2018
-
MFI interest rate statistics
- 31 January 2018
-
Working Paper Series - Issue No. 2127Details
- Abstract:
- We evaluate the effects of permanently reducing labour tax rates in the euro area (EA) by simulating a large-scale open economy dynamic general equilibrium model. The model features the EA as a monetary union, split in two regions (Home and the rest of the EA - REA), the US, and the rest of the world, region-specific labour markets with search and matching frictions, and public employment. Our results are as follows. First, a permanent reduction in labour tax rates in the Home region would have stimulating effects on domestic economic activity and employment. Second, reducing labour tax rates simultaneously in both Home and REA would have additional expansionary effects on the Home region. Third, in the short run the expansionary effects on the EA economy of a EA-wide tax reduction are enhanced if the EA monetary policy is accommodative.
- JEL Code:
- E24,E32,E52,E62,F45
- Network:
- N/A
- 31 January 2018
-
Working Paper Series - Issue No. 2126Details
- Abstract:
- We assess the impact of credit constraints on investment, inventories and other working capital and firm growth with a large panel of small and medium-sized enterprises from 12 European countries for the period 2014-2016. The data come from the Survey on the access to finance of enterprises (SAFE), a survey that is especially designed to analyse the problems in the access to external finance of European SMEs. The key identification challenge is a potential reverse-causality bias, as firms with poor investment and growth opportunities may have a higher probability of being credit constrained. We implement several strategies to overcome this obstacle: proxies for investment opportunities, lagged regressors, random effects and instrumental variables. Our findings suggest that credit constraints, both in bank financing and other financing (e.g. trade credit), have strong negative effects on investment in fixed assets, while the impact on firm growth and working capital is less robust.
- JEL Code:
- G30,G31,G32
- Network:
- N/A
- 31 January 2018
-
Working Paper Series - Issue No. 2125Details
- Abstract:
- Large-scale asset programmes aim to impact the real economy through the financial system. The ECB has focused much of its policies on safe assets. An intended channel of transmission of this type of programme is the “portfolio rebalancing channel”, whereby investors are influenced to shift their investments away from such safe assets towards assets with higher expected returns, including lending to households and firms. We examine the portfolio rebalancing channel around the ECB’s asset purchase program (APP). We exploit cross-sectional heterogeneity in the impact of APP on the valuation of the financial portfolio held by different sectors of the European economy. Overall, our results provide evidence of an active portfolio rebalancing channel. In more vulnerable countries, where macroeconomic unbalances and relatively high risk premia remain, APP was mostly reflected into a rebalancing towards riskier securities. In less vulnerable countries, where constraints on loan demand and supply are less significant, the rebalancing was observed mostly in terms of bank loans. Examining large European banks, we confirm similar geographical differences.
- JEL Code:
- E44,E51,G21
- Network:
- Research Task Force (RTF)
- 31 January 2018
-
Working Paper Series - Issue No. 2124Details
- Abstract:
- More than five years after the start of the Sovereign debt crisis in Europe, its impact on labour market outcomes is not clear. This paper aims to fill this gap. We use qualitative firm-level data for 24 European countries, collected within the Wage Dynamics Network (WDN) of the ESCB. We first derive a set of indices measuring difficulties in accessing the credit market for the period 2010-13. Second, we provide a description of the relationship between credit difficulties and changes in labour input both along the extensive and the intensive margins as well as on wages. We find strong and significant correlation between credit difficulties and adjustments along both the extensive and the intensive margin. In the presence of credit market difficulties, firms cut wages by reducing the variable part of wages. This evidence suggests that credit shocks can affect not only the real economy, but also nominal variables.
- JEL Code:
- D53,E24,E44,G31,G32
- Network:
- Wage dynamics network
- 31 January 2018
-
SpeechDetails
- Subtitle:
- Speech by Benoît Cœuré, Member of the Executive Board of the ECB at the Financial Times European Financial Forum, “Building a New Future for International Financial Services”, Dublin, 31 January 2018
- 31 January 2018
-
T2S Harmonisation progress report - Issue No. 31
- 31 January 2018
-
InterviewDetails
- Subtitle:
- Interview with Benoît Cœuré, Member of the Executive Board of the ECB, conducted by Sean Whelan on 31 January 2018
- 30 January 2018
-
SpeechDetails
- Subtitle:
- Speech by Yves Mersch, Member of the Executive Board of the ECB, IMFS Distinguished Lecture Series Goethe Universität Frankfurt, 30 January 2018
- 30 January 2018
-
Weekly financial statementAnnexes
- 30 January 2018
-
Weekly financial statement - Commentary
- 30 January 2018
- 30 January 2018
- 29 January 2018
-
SpeechDetails
- Subtitle:
- Présentation de Benoît Cœuré, membre du directoire de la BCE, Medef – Commission Economie et financements, Paris le 29 janvier 2018
- 29 January 2018
-
SpeechDetails
- Subtitle:
- Speech by Sabine Lautenschläger, Member of the Executive Board of the ECB and Vice-Chair of the Supervisory Board of the ECB, Institute for Law and Finance Conference on Basel III, Frankfurt am Main, 29 January 2018
- 29 January 2018
-
SpeechDetails
- Subtitle:
- Speech by Peter Praet, Member of the Executive Board of the ECB, at the Council of the European Union, Brussels, 29 January 2018
- 26 January 2018
- 26 January 2018
-
Governing Council decisions - Other decisions